NGL Energy Partners Inks Deal To Buy Gavilon Assets For $890 Million

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To acquire the midstream energy business including a 50% interest in Glass Mountain Pipeline.

Continuing a string of recent midstream deals, NGL Energy Partners LP (NYSE:NGL) will take over Gavilon LLC for $890 million, NGL announced Nov. 6.

Gavilon is a diversified midstream energy business owned by funds managed by Ospraie Management, General Atlantic and Soros Fund Management.

The agreement contemplates the purchase of Gavilon’s energy business on a cash-free, debt-free basis for a cash purchase price of $890 million, which includes approximately $200 million of working capital.

The consummation of the transaction is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act. The acquisition, which is anticipated to close in December 2013, is expected to be immediately accretive to NGL’s distributable cash flow per unit.

Gavilon principally operates integrated crude oil storage, terminal and pipeline assets located in Oklahoma, Texas and Louisiana, along with a complementary crude oil and refined products supply, marketing and logistics business (SM&L).

Gavilon’s crude oil assets include a 50% interest in Glass Mountain Pipeline, with 4.14 million owned and 3.85 million leased barrels of storage in Cushing, Okla.

The company also owns a marine terminal and nine truck terminals. Through its SM&L business, Gavilon also leases a network of over 200 trucks, 350 railcars and eight barges to transport crude oil for customers. Gavilon also markets and supplies refined products and natural gas liquids through a network of more than 300 distribution terminals across 39 states.

NGL anticipates that the cash purchase price, which represents approximately 7.5x Gavilon 2014 estimated earnings before interest, taxes, depreciation and amortization (EBITDA) will be financed with $240 million of equity under a private placement of common units and $650 million of borrowings under its credit facility.

The transaction is expected to provide NGL with an attractive portfolio of organic growth opportunities, with approximately $65 million of organic growth capital expenditures associated with the build-out of terminal assets budgeted for remainder of 2013 and 2014. As a significant portion of the assets to be acquired are newly constructed, maintenance capital expenditures are expected to be less than 5 percent of EBITDA annually for the next several years.

In connection with the proposed acquisition, UBS Investment Bank is serving as NGL’s exclusive financial advisor and Locke Lord LLP is serving as NGL’s legal counsel. Barclays is serving as Gavilon’s and the Sellers’ exclusive financial advisor. Jones Day and McGrath North provided legal representation for Gavilon.

The acquisition is expected to close by December 2013.