During Friday mid-day trading, stock price of NGL Energy Partners LP (NYSE: NGL) jumped up 50.99% to $13.77 after the company announced that it has made the agreement with a subsidiary of ArcLight Capital Partners to sell TransMontaigne GP LLC for $350 million in cash. TransMontaigne GP is the general partner of TransMontaigne Partners L.P. (NYSE: TLP) and own 2% interest for general partner and incentive distribution rights of TransMontaigne Partners. NGL expects to complete the transaction by the end of January 2016, and using the cash to repay borrowings outstanding on the company’s revolving credit facility.
After the transaction’s completion, NGL’s annually earnings before interest, taxes, depreciation, and amortization (EBITDA) is estimated to increase $20 million, because of cost reductions and revenue enhancements. But the company will no more receive payments from incentive distribution rights and the TransMontaigne GP. This reduction will have a negative impact of almost $7.6 million, which will result to a $12 million net increase in EBITDA.
Mike Krimbill, CEO of NGL Energy Partners stated: “I believe this is a very positive transaction for both NGL and ArcLight. NGL will remain the long-term exclusive tenant in the TLP Southeast terminal system and we look forward to our ongoing partnership with ArcLight. ArcLight has been great to work with and NGL will enter into certain commercial transactions with, as well as provide various transition services for, ArcLight.”
“We are excited to acquire a leading refined products platform that is complementary to our recent activity in the refined product storage and logistics segment,” said Dan Revers, Managing Partner and co-founder of ArcLight. “The acquisition of TransMontaigne GP will mark the fourth major refined product terminals acquisition in the last twelve months and is emblematic of a concerted strategy to acquire and develop infrastructure along the refined products value chain. We are also pleased to continue the long-term relationship with NGL as a significant customer and look forward to expanding the relationship as we grow the assets.”
NGL announced the net proceeds from the deal will considerably reduce leverage, increase liquidity, and could decrease leverage further through the sale of the retains approximately 3.2 million TransMontaigne Partners common units. Moreover, the company also said that the deal positions it to complete its growth projects, bridge to the Grand Mesa pipeline in-service date and continue paying its $2.56 annual common unit distribution.