Who saw today's article? I don't know if Dan Mokowitz knows anything but it looks like he's written articles for a lot of the financial websites so it looks like he's at least familiar with stocks. He calls NTI a "standout" and says its one of the two best material stocks of 2016. Love this part, "NTI has a debt-to-equity ratio of 0.72 and has generated $402.30 million in operational cash flow over the past 12 months. The stock has appreciated 13.92% over the same time frame and currently yields 16.17%. However, it’s being acquired by Western Refining, Inc."
So lets summarize:
Low debt to equity - check.
Good cash flow - check
Unit appreciation - check
High yield - check
So if you are the "independent" board, this looks like a no brainer to accept a buyout with no premium, right?
Harvard Business School should have a field day with this one.
We are giving up our cash cow for a quarterly dividend of 38 cents? How does this make any sense? We got over a dollar last quarter and will probably be about the same this time.
Who read the Motley Fool article? In talking about Western it says, "Buying up the rest of Northern Tier's shares outstanding is a good long term decision because Northern Tier continues to be one of the best performing refiners in the nation with low feedstock costs and high returns on capital." Our General Partner can see this, this author can see this, all of us little guys can see this but apparently our Board can't. If you are a best performer, don't you seek a premium?
In November 2013 when Western bought the GP interest, the CEO of Western was quoted as saying, "The combined strength and scale of the two organizations will provide future growth opportunities for both companies over the long-term." Apparently the long term was all of about 2 years. How many unitholders feel like this transaction is "growth"? How many unitholders feel like our "independent" directors are looking out for them?
For years, people have talked about how a single location refinery is risky because the potential of an accident. Well, there was a fire in September 2013 and what happened. Distribution went from 68 cents in August to 31 cents in November. Even after a fire it was still 31 cents for the quarter and up to 41 cents by February. So even after a fire, it was still paying us. That's the kind of risk I will take. Funny enough, Western apparently was ok with the risk as well because they bought in a month after the fire.
This place sources the cheapest oil in American from either ND or Canada. It has a healthy and essentially captive market in the Twin Cities. It owns one of the largest, if not the largest, gasoline retailer in the state of Minnesota. It owns part of the pipeline that brings it the cheap oil. A lot of people might consider that advantageous and worth a price premium but apparently our general "partner" and "independent" directors don't think so.
I'm absolutely floored that this deal is going through. Clearly not an arms length negotiation/transaction and absolutely no one looking out for unitholders despite the fiduciary responsibilities of the board and general partner. The sad excuse that equity markets are not rewarding the MLP model is laughable. Any rise in the unit price is gravy, where else can you find these kind of distributions at a relatively low risk level. Complain about not having the unit price rewarded and then give away the company. Sad.