In its largest drop-down transaction to date, agreedto acquire 30 crude, refined products and NGL logistics assets from for $1.3 billion.
The consideration represents an 8.7x multiple on theforecast full-year 2017 EBITDA from the assets of $150 million. Under the deal,Phillips 66 would enter into 10-year terminaling and throughput agreements forminimum commitments covering about 85% of forecast volumes, according to anOct. 11 news release.
The assets include thousands of miles of pipelines andmillions of barrels of storage capacity, spread across crude pipeline andterminaling systems supplying Phillips 66's Ponca City, Billings and Borgerrefineries, as well as refined products and NGL pipeline and terminal systemsthat provide transport services to the refineries, plus storage at the Baywayrefinery.
To fund the acquisition, Phillips 66 Partners launched apublic offering of two series of unsecured senior notes. The partnership hasnot yet announced the principal amount, maturity and other terms. Proceeds inexcess of those for the deal would be used for general partnership purposessuch as debt repayment and CapEx funding. The offering is not dependent uponthe acquisition closing.
The consideration for the drop-down would also be paid forwith $196 million worth of Phillips 66 Partners units issued to Phillips 66, ina proportion of common units and general partner units that would allowPhillips 66 to maintain its 2% general partner interest.
The deal is part of Phillips 66 Partners' commitment tocarry out a five-year distribution compound annual growth rate of 30% through2018, according to Chairman and CEO Greg Garland.
Upon closing, which is scheduled for October, the partnershipmay receive earnings from the assets as of Oct. 1.
For the acquisition, Evercore acted as Phillips 66 Partners'financial adviser and Vinson & Elkins LLP acted as its legalcounsel. For the offering, J.P. Morgan Securities LLC, Credit SuisseSecurities (USA) LLC, Goldman Sachs &Co. and Mizuho Securities USA Inc. are acting as thejoint book-running managers.