Independent liquids terminal/pipeline operator NuStar Energy LP and NuStar GP Holdings (NSH), which owns NuStar Energy's general partner, said last week they hope to merge, with NuStar GP becoming a wholly-owned NuStar Energy unit.
Under the terms of the deal, NSH unitholders would receive 0.55 of a NuStar Energy common unit in exchange for each NSH unit they own at closing, representing a premium of roughly 1.7% based on the closing prices of the Partnership’s common units and of NSH’s units on Feb. 7. The value of the deal is roughly $573.84 million, Kallanish Energy calculates.
The transaction would result in roughly 23.6 million additional common units being issued by the partnership.
In connection with this deal, William E. Greehey, board chairman of both NSH and the partnership, who controls roughly 21% of the outstanding NSH units, has agreed to vote his NSH units in favor of the merger.
“After much discussion and deliberation, the NS and NSH Boards reached an agreement to simplify in a way that we believe will allow us to capitalize on attractive growth opportunities and to best manage our business over the long term,” said Brad Barron, president and CEO of the partnership and NSH.
Barron said simplifying the companies’ corporate structure and eliminating incentive distribution rights will lower cost of capital and create a more efficient and transparent structure.
Barron noted that the merger is expected to provide many benefits to current Partnership unitholders and, upon exchange of their NSH units for partnership common units at closing of the merger, current NSH unitholders, including:
* Lowering the partnership’s long-term cost of capital through the permanent elimination of incentive distribution rights, allowing the partnership to enhance its cash accretion from investments in organic growth projects and acquisitions;
* Attracting a broader investor base to a single, larger entity;
* Reducing general and administrative costs by roughly $1 million per year primarily from eliminating public company expenses associated with NSH.
The completion of the merger is subject to the approval of holders of at least a majority of the outstanding NSH units and other closing conditions, and is expected to occur during the second quarter of 2018.