Hiland Partners LP, Enid, Okla., (Nasdaq: HLND) has revised its plans to go private as Harold Hamm has lowered his offering to buy the company and its general partner, Hiland Holdings GP (Nasdaq: HPGP) in a deal now valued at $124.4 million in cash.
Hamm will offer $7.75 per Hiland Partners unit for a total $72.5 million and $2.40 per Hiland Holdings unit for a total $51.9 million. Hamm previously offered $9.50 per Hiland Partners unit and $3.20 per Hiland Holdings unit in a deal valued at $158 million.
Hamm cited the price reduction was due to continued declines in gas prices and drilling activity along Hiland Partners’ and its effects on the company’s midstream segment margins and cash flows since his original proposal on Jan. 15.
Other terms remain unaffected and call for Hamm, the executive teams and most, if not all, employees to remain in place once the companies are taken private via a merger with a new acquisition vehicle.
Hiland Partners primarily operates in the Midcontinent and Rockies regions and its assets consist of 14 gas-gathering systems with approximately 2,111 miles of gas gathering pipelines, five gas-processing plants, seven gas-treating facilities, and three natural gas liquids fractionation facilities, two air compression facilities and a water injection plant.
"I believe that, if the adverse impact of commodity prices on gathering and processing fundamentals and the challenges presented by the global economic crisis persist, the partnership will experience a meaningful decrease in future distributable cash flow and will need substantial new equity capital to remain in continued compliance with its debt covenants," Hamm said in a letter of the boards of directors.
Hiland Partnership went public in 2005 and Hiland Holdings followed suit by entering the market in 2006, but the companies suffered significant decreases in unit prices since the second half of 2008. From Q3 2008 to the present unit prices for the Partnership are down over 80%, while the general partner's unit prices are down over 90% during the same period.
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