SemGroup Corp. agreed to acquire Houston Fuel Oil Terminal Co. from investment funds managed by Alinda Capital Partners LLC for $2.1 billion in a bid to solidify SemGroup's position on the Gulf Coast.
The assets comprise a 16.8 million-barrel terminal on 330 acres in the Houston Ship Channel with connectivity to the local refining complex, deepwater marine access, and inbound pipeline and rail and truck receipt capabilities from major producing basins, SemGroup said in a June 6 news release.
The terminal is supported by take-or-pay contracts with long-term customers and developing growth projects such as a new ship dock, a new pipeline and connections, and additional crude oil storage of 1.45 million barrels, scheduled to begin service by mid-2018.
"Consistent with our strategy to diversify our portfolio and become more refinery facing, [Houston Fuel Oil Terminal] brings a well-established base of high-quality, long-tenured customers," said Carlin Conner, president and CEO of SemGroup.
SemGroup would fund the deal in two payments: $1.5 billion at closing, including the assumption of about $785 million of debt and the issuance of $300 million to $400 million in SemGroup common shares to Alinda at $32.30 per share, and $600 million to be paid before the end of 2018.
The deal is scheduled to close in the third quarter, after which Houston Fuel Oil is estimated to contribute $60 million to $65 million of additional 2017 adjusted EBITDA. SemGroup also projects an increase in 2017 CapEx to $575 million from $500 million.
Credit Suisse Securities (USA) LLC served as SemGroup's exclusive financial adviser, while Vinson & Elkins LLP and Gibson Dunn & Crutcher LLP served as legal advisers.