DALLAS, Oct. 22, 2018 /PRNewswire/ -- The EnLink
Midstream companies, EnLink Midstream, LLC (NYSE: ENLC)
(the General Partner) and EnLink Midstream Partners, LP
(NYSE: ENLK) (the Master Limited Partnership), today announced that
they entered into a merger agreement whereby ENLC will acquire all
outstanding common units of ENLK not already owned by ENLC in a
unit-for-unit exchange transaction to simplify its corporate
structure. The transaction is expected to close in the first
quarter of 2019, and upon closing, EnLink will continue to operate
as ENLC, a leading midstream energy provider with diversified
service offerings across key supply basins and demand regions in
the United States.
At closing, the pro forma company will retain the name EnLink
Midstream, LLC ("PF ENLC") and will continue to trade on the New
York Stock Exchange as ENLC. Under the terms of the merger
agreement, ENLK common unitholders will be entitled to receive 1.15
common units of PF ENLC for each common unit of ENLK owned. In
connection with the transaction, ENLC's incentive distribution
rights (IDRs) in ENLK will be eliminated.
The transaction was approved by the Conflicts Committees and
Boards of Directors of both ENLC and ENLK.
A presentation regarding the transaction has been posted to
www.EnLink.com, and interested parties are encouraged to reference
this document for further information.
Expected Transaction Benefits:
- Creates a $13 billion enterprise
value company upon closing.
- Simplifies the organizational structure into a single, larger
publicly traded midstream energy company, increasing the public
float and enhancing trading liquidity.
- Improves project returns with a lower cost of capital for the
pro forma entity.
- Delivers immediate accretion to distributable cash flow (DCF)
per unit for both ENLC and ENLK unitholders. Distributable cash
flow (DCF) is a non-GAAP measure and is explained in greater detail
under "Non-GAAP Financial Information."
- Expected to provide low double-digit, DCF-per-unit growth
through 2021.
- Reflects EnLink's ongoing commitment to investment-grade-style
credit metrics.
- All three credit rating agencies are expected to reaffirm
current ratings.
- Drives significant improvement in distribution coverage to 1.3x
to 1.5x through 2021, and results in excess of $700 million of cumulative retained cash flow (as
defined below) over the same period, supporting EnLink's plans to
self-fund the equity portion of a majority of growth capital
expenditures.
- Results in sustainable distribution growth of 5 percent or
greater annually for at least three years.
- Provides 1099 tax form, and PF ENLC is expected to pay minimal
cash federal income taxes through at least 2023.
"EnLink has been on a journey to evolve for long-term success.
Today, we took another right step in our journey through the
announcement of our simplification transaction, which will be
immediately accretive to both ENLC and ENLK common unitholders,"
said Michael J. Garberding, EnLink
President and Chief Executive Officer. "Our business model is
unchanged, and we continue to execute on our 7 growth strategies.
Through this transaction, we will now have a streamlined structure
that further strengthens our ability to achieve greater returns on
the capital we deploy, allowing us to create lasting value for all
our stakeholders."
Simplification Transaction Details
Under the terms of
the agreement, ENLC will acquire 100 percent of the outstanding
ENLK common units that it does not already own. ENLK common
unitholders will be entitled to receive 1.15 units of PF ENLC per
ENLK unit owned. The consideration for ENLK common unitholders
represents a premium of 3.5 percent based on the volume weighted
average price for both securities over the last 30 trading days. As
part of the simplification, PF ENLC will eliminate all IDRs in
ENLK. EnLink's Series B Preferred Units, Series C Preferred Units,
and senior notes will continue to remain outstanding at ENLK. PF
ENLC will have approximately 490 million fully diluted units
outstanding at transaction close.
The transaction results in a tax basis step-up for PF ENLC with
respect to the assets of ENLK. The step-up in tax basis will
enhance PF ENLC's tax outlook and is expected to result in minimal
income taxes through at least 2023. The transaction is expected be
taxable to ENLK common unitholders, who are encouraged to consult
with their tax advisor regarding the potential tax impact from the
transaction.
Concurrent with the execution of the merger agreement, an
affiliate of GIP that owns a majority of outstanding ENLC common
units executed a written consent to approve such issuance. This
consent satisfied the requisite approval of the ENLC unitholders
for the issuance by ENLC of common units in the transaction. The
transaction is subject to the approval of holders of a majority of
the ENLK common units. As part of the transaction, GIP, ENLC, and
certain subsidiaries of ENLC entered into a support agreement
agreeing to vote in favor of the transaction. The transaction is
expected to close in the first quarter of 2019, subject to
obtaining the ENLK unitholder approval, customary regulatory
approvals, and other customary closing conditions.
Financial and Legal Advisors
Baker Botts L.L.P. acted
as legal advisor and Citi acted as financial advisor to ENLC.
Gibson, Dunn & Crutcher LLP acted as legal advisor to
ENLK. Potter Anderson & Corroon LLP acted as legal
counsel, and Evercore acted as financial advisor to ENLK's
Conflicts Committee. Richards Layton & Finger, P.A. acted as
legal counsel, and Barclays acted as financial advisor to ENLC's
Conflicts Committee. Latham & Watkins acted as legal advisor
and Intrepid Partners, LLC acted as financial advisor to
GIP.
Conference Call
EnLink will host a conference call on
Monday, October 22 at 9 a.m. Central Time to discuss the transaction.
The dial-in number for the call is 1-855-656-0924. Callers outside
the United States should dial
1-412-542-4172. Participants can also preregister for the
conference call by navigating
to http://dpregister.com/10124851. Here, they will
receive their dial-in information upon completion of
preregistration. Interested parties can access an archived replay
of the call on the Investors page of www.EnLink.com.
About the EnLink Midstream Companies
EnLink provides
integrated midstream services across natural gas, crude oil,
condensate, and NGL commodities. EnLink operates in several top
U.S. basins and is strategically focused on the core growth areas
of the Permian's Midland and Delaware basins, Oklahoma's Midcontinent, and Louisiana's Gulf Coast. Headquartered in
Dallas, EnLink is publicly traded
through EnLink Midstream, LLC (NYSE: ENLC), the General Partner,
and EnLink Midstream Partners, LP (NYSE: ENLK), the Master Limited
Partnership. Visit www.EnLink.com for more information on how
EnLink connects energy to life.
Non-GAAP Financial Information & Other
Definitions
This press release contains a non-generally
accepted accounting principles financial measure that we refer to
as distributable cash flow available to common unitholders
("distributable cash flow"). We define distributable cash flow as
adjusted EBITDA (as defined below), less (i) interest expense, (ii)
litigation settlement adjustment, (iii) adjustments for the
redeemable non-controlling interest, (iv) interest rate swaps, (v)
current income taxes and other non-distributable cash flows, (vi)
accrued cash distributions on Series B Preferred Units and Series C
Preferred Units paid or expected to be paid, and (vii) maintenance
capital expenditures, excluding maintenance capital expenditures
that were contributed by other entities and relate to the
non-controlling interest of our consolidated entities.
We define adjusted EBITDA as net income (loss) plus (i) interest
expense, (ii) provision (benefit) for income taxes, (iii)
depreciation and amortization expense, (iv) impairments, (v)
unit-based compensation, (vi) (gain) loss on non-cash derivatives,
(vii) (gain) loss on disposition of assets, (viii) (gain) loss on
extinguishment of debt, (ix) successful acquisition transaction
costs, (x) accretion expense associated with asset retirement
obligations, (xi) reimbursed employee costs, (xii) non-cash rent,
(xiii) cash collections under the secured term loan receivable and
(xiv) distributions from unconsolidated affiliate investments, less
(i) payments under onerous performance obligations, (ii)
non-controlling interest, (iii) (income) loss from unconsolidated
affiliate investments, and (iv) non-cash revenue from contract
restructuring.
We define retained cash flow as (i) expected distributable cash
flow minus (ii) total distributions expected to be declared.
Series B Preferred Units means Series B Cumulative Convertible
Preferred Units of ENLK. Series C Preferred Units means
Series C Fixed-to-Floating Rate Cumulative Redeemable Perpetual
Preferred Units of ENLK.
Forward-Looking Statements
This press release contains
forward-looking statements within the meaning of the federal
securities laws. Although these statements reflect the current
views, assumptions, and expectations of our management, the matters
addressed herein involve certain assumptions, risks, and
uncertainties that could cause actual activities, performance,
outcomes, and results to differ materially than those indicated
herein. Therefore, you should not rely on any of these
forward-looking statements. All statements, other than statements
of historical fact, included in this press release constitute
forward looking statements, including but not limited to statements
identified by the words "forecast," "may," "believe," "will,"
"should," "plan," "predict," "anticipate," "intend," "estimate,"
and "expect" and similar expressions. Such forward-looking
statements include, but are not limited to, statements about the
proposed transaction, the expected consideration to be received in
connection with the closing of the proposed transaction, the timing
of the consummation of the proposed transaction, if it will be
consummated at all, that the proposed transaction will be
accretive, the expected impact of the elimination of ENLK's
incentive distribution rights, the expected impact of the
transaction on cost of capital, other anticipated cost savings or
tax benefits from the proposed transaction, whether the structure
resulting from the proposed simplification transaction will
streamline governance, align management, employees GIP and
unitholders, the pro forma description of ENLC and its operations
following the proposed transaction, the amount, timing, and payment
of distributions, guidance information regarding distributions,
projected or forecasted financial and operating results,
objectives, expectations, intentions, and other statements that are
not historical facts. Factors that could result in such differences
or otherwise materially affect our financial condition, results of
operations, or cash flows include, without limitation, (a) the
dependence on Devon for a substantial portion of the natural gas
that we gather, process, and transport, (b) developments that
materially and adversely affect Devon or other customers, (c)
Devon's ability to compete with us, (d) adverse developments in the
midstream business may reduce our ability to make distributions,
(e) our vulnerability to having a significant portion of our
operations concentrated in the Barnett Shale, (f) continually
competing for crude oil, condensate, natural gas, and NGL supplies
and any decrease in the availability of such commodities, (g)
decreases in the volumes that we gather, process, fractionate, or
transport, (h) construction risks in our major development
projects, (i) our ability to receive or renew required permits and
other approvals, (j) changes in the availability and cost of
capital, including as a result of a change in our credit rating,
(k) operating hazards, natural disasters, weather-related issues or
delays, casualty losses, and other matters beyond our control, (l)
impairments to goodwill, long-lived assets and equity method
investments, and (m) the effects of existing and future laws and
governmental regulations, including environmental and climate
change requirements and other uncertainties. These and other
applicable uncertainties, factors, and risks are described more
fully in EnLink Midstream Partners, LP's and EnLink Midstream,
LLC's filings (collectively, "EnLink Midstream") with the
Securities and Exchange Commission (the "SEC"), including EnLink
Midstream Partners, LP's and EnLink Midstream, LLC's Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K. Neither EnLink Midstream Partners, LP nor EnLink
Midstream, LLC assumes any obligation to update any forward-looking
statements.
The assumptions and estimates underlying the forecasted
financial information included in the guidance information in this
press release are inherently uncertain and, though considered
reasonable by the EnLink Midstream management team as of the date
of its preparation, are subject to a wide variety of significant
business, economic, and competitive risks and uncertainties that
could cause actual results to differ materially from those
contained in the forecasted financial information. Accordingly,
there can be no assurance that the forecasted results are
indicative of EnLink Midstream's future performance or that actual
results will not differ materially from those presented in the
forecasted financial information. Inclusion of the forecasted
financial information in this press release should not be regarded
as a representation by any person that the results contained in the
forecasted financial information will be achieved.
Important Information for Investors and Unitholders
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. In connection with the transactions referred
to in this press release, ENLC expects to file a registration
statement on Form S-4 with the Securities and Exchange Commission
("SEC") containing a preliminary joint information statement and
proxy statement of ENLC and ENLK that also constitutes a
preliminary prospectus of ENLC. After the registration statement is
declared effective, ENLK will mail a definitive proxy
statement/prospectus to unitholders of ENLK, and ENLC will mail a
definitive information statement to unitholders of ENLC. This press
release is not a substitute for the joint proxy
statement/prospectus/information statement or registration
statement or for any other document that ENLC or ENLK may file with
the SEC and send to ENLC's and/or ENLK's unitholders in connection
with the proposed transactions. INVESTORS AND SECURITY HOLDERS OF
ENLC AND ENLK ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS/INFORMATION STATEMENT AND OTHER DOCUMENTS
FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors and security holders will be able to obtain free
copies of the proxy statement/ prospectus/ information statement
(when available) and other documents filed with the SEC by ENLC or
ENLK through the website maintained by the SEC at
http://www.sec.gov. Copies of the documents filed with the SEC by
ENLC and ENLK will be available free of charge on ENLC's and ENLK's
website at www.enlink.com, in the "Investors" tab, or by contacting
ENLC's and ENLK's Investor Relations Department at
214-721-9696.
Participants in the Solicitation
ENLC and the
directors and executive officers of the managing member of ENLC and
the directors and executive officers of the general partner of ENLK
may be considered participants in the solicitation of proxies with
respect to the proposed transactions under the rules of the SEC.
Information about the directors and executive officers of the
managing member of ENLC may be found in its Annual Report on Form
10-K for the year ended December 31,
2017 filed with the SEC on February
21, 2018. Information about the directors and executive
officers of the general partner of ENLK may be found in its Annual
Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on
February 21, 2018. These documents
can be obtained free of charge from the sources indicated above.
Additional information regarding the participants in the proxy
solicitations and a description of their direct and indirect
interests, by security holdings or otherwise, will also be included
in any proxy statement and other relevant materials to be filed
with the SEC when they become available.
Investor Relations: Kate
Walsh, Vice President of Investor Relations, 214-721-9696,
kate.walsh@enlink.com
Media Relations: Jill
McMillan, Vice President of Public & Industry Affairs,
214-721-9271, jill.mcmillan@enlink.com
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SOURCE EnLink Midstream Companies