Current AMID Stock Info

ArcLight Capital Partners combines two of its sponsored MLPs into one entity

American Midstream Partners (ticker: AMID) announced that it will merge with JP Energy Partners (ticker: JPEP) in a unit-for-unit deal, forming an MLP with a $2 billion enterprise value, according to the company’s press release Monday. Both companies are sponsored by ArcLight Capital Partners, which will combine the general partners for both MLPs as part of the merger.

Under the terms of the agreement, American Midstream common units will be issued to JP Energy public unitholders at an exchange ratio of 0.5775:1 and to affiliates of ArcLight that hold common units and subordinated units at an exchange ratio of 0.5225:1, resulting in a blended average exchange ratio of 0.55:1. The consideration to JPEP unitholders is based on a value of $8.63 per unit of American Midstream, representing a 14.5% premium to the closing price of JP Energy’s common units of $7.54 on October 21, 2016 and a 14.2% premium to the volume weighted average closing price of JP Energy common units for the last 20 trading days ending October 21, 2016.

Adjusted EBITDA for the combined company will be $185 million, assuming 2016 mid-point guidance from each respective company, and include synergies of approximately $10 million. ArcLight affiliates have also agreed to provide additional support to the combined partnership to achieve average annual distributable cash flow per unit accretion of approximately 5% for 2017 and 2018 the company said in its press release.

Scale and diversification of American Midstream Partners following acquisition of JP Energy Partners MLP

The combined MLP will have more than 3,100 miles of gathering and transportation pipeline, over 2.5 Bcf/d of transportation capacity, six processing plants with 400 MMcf/d of processing capacity, three fractionation facilities with 20 MBOPD of capacity, a 13.9% interest in an offshore floating production facility in the deep-water Gulf of Mexico, more than 6 MMBO of above-ground liquids storage capacity, and the third-largest wholesale propane business in the United States.

The combination will also improve AMID’s liquidity, with the combined company having a leverage ratio of 3.8x, down from American Midstream’s 4.2x. The company will have pro forma liquidity of over $250 million, and a long-term goal of a leverage ratio of 3.5x, according to the investor presentation that accompanied the deal today.

American Midstream and JP Energy combined MLP asset map

“The merger elevates and reshapes our two businesses into a new platform that we expect will allow for higher growth, new business opportunities and a stronger financial position than either company could achieve separately,” said Lynn L. Bourdon, III, Chairman, President and Chief Executive Officer of American Midstream. “This transformational combination is the next logical step in expanding services from the wellhead to the end user market. We will begin to experience the impact of our value chain growth strategy by offering customers a more competitive suite of services that enables us to capture incremental fee opportunities that maximize returns to unitholders.”

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