Featured Company News - American Midstream Buys Southcross Energy and Certain Assets of Southcross Holdings
LONDON, UK / ACCESSWIRE / November 3, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for American Midstream Partners, L.P. (NYSE: AMID) ("AMID"), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=AMID. The Company announced on November 01, 2017, that it has signed an agreement to acquire certain assets of Southcross Holdings, L.P. Parallelly, it has proposed to acquire and merge business of Southcross Energy Partners, L.P. (NYSE: SXE) with its wholly owned subsidiary. The value of both transactions is expected to be approximately $815 million including debt. The acquisition and merger create an entity with an enterprise value of $3 billion with an annualized adjusted EBITDA of over $300 million in FY18. For immediate access to our complimentary reports, including today's coverage, register for free now at:
http://protraderdaily.com/register/
At Pro-TD, we make it our mission to bring you news that matter about the stock you follow. Today, our research desk covers a blog story on AMID and SXE. Go directly to your stock of interest and access today's free coverage at:
http://protraderdaily.com/optin/?symbol=AMID
http://protraderdaily.com/optin/?symbol=SXE
Management Comments
Commenting on the acquisition, Lynn L. Bourdon, III, Chairman, President, and CEO of AMID, said:
"This transaction accelerates our transformation into a fully integrated gathering, processing and transmission Company focused in select core areas. The transaction also furthers our strategy of redeploying capital into higher growth businesses along with divesting non-core assets at attractive multiples."
Bruce A. Williamson, President and CEO of Southcross' General Partner, added:
"Private and public equity holders from both Southcross Holdings and Southcross Energy will be able to participate in a more diverse, sustainably capitalized Company with units that offer immediate cash distributions and strong coverage. In addition, the revolver and term debt holders at both Southcross Companies will be repaid in full at closing."
Assets gained from Transaction
Southcross Holdings indirectly owns 100% equity in the general partner of Southcross Energy which owns a gas pipeline, treating and fractionation facilities at Eagle Ford Shale and in South Texas. Southcross Energy is an integrated natural gas midstream services provider with assets primarily in the Eagle Ford as well as Mississippi and Alabama.
Once the transaction is completed, AMID will own and operate assets of Southcross Holdings which own all assets of Southcross Energy. On completion AMID will own and manage complementary and integrated midstream infrastructure consisting of the following:
Approximately 8,000 miles of crude, natural gas and NGL pipelines;
Over 2.5 Bcf/d of natural gas transmission capacity;
Ten processing plants with over 1.0 Bcf/d of capacity;
Six fractionation facilities with 111,500 Bbl/d of capacity;
35.7% of Delta House floating production facility in the deep-water Gulf of Mexico; and
6.7 million barrels of above-ground liquids storage capacity.
Financial Details of the transaction
AMID will acquire an equity stake in certain assets of Southcross Holdings' subsidiaries. These subsidiaries directly or indirectly own 100% stake in Southcross Energy's general partner and approximately 55% shares of Southcross Energy. AMID has agreed to issue 3.4 million common units of AMID; 4.5 million new Series E convertible preferred units of AMID; and options to acquire 4.5 million AMID's common units as total consideration for acquiring assets of Southcross. As part of this deal, AMID will also repay debts of Southcross valued $139 million. The price of preferred units is at $15.00 per unit and AMID has the option to convert them into AMID common unit for a period of two years. The conversion of preferred units into AMID common units would be done if the AMID 20-day volume weighted average price exceeds $22.50. The options units expire in FY22 and are American-style call options with an $18.50 strike price.
AMID has agreed to pay 0.160 AMID's common units for each SXE's common unit for the public who own units of Southcross. The transaction is expected to have minimal tax implications.
The entire transaction is dependent on the closing of the AMID/Southcross Holdings transaction. Till the transaction is not completed, all parties to the agreement – AMID, Southcross Holdings, and Southcross Energy will continue to operate as individual entities.
As part of the deal, an affiliate of ArcLight Capital Partners, LLC and AMID's sponsor has agreed to transfer ownership of 15% of AMID's general partner and incentive distribution rights to Southcross Holdings.
The transaction is expected to close in Q2 2018 and is subject to regulatory approvals and approval from public unit-holders of Southcross Energy, the completion of the AMID/Southcross Holdings transaction and other closing conditions.
Financial implications
AMID expects the deal to be highly beneficial to unit-holders of Southcross Energy as they would get an opportunity to be a part of AMID's growth story and benefit from AMID's cash distribution on its units, which is currently $1.65 per common unit yearly. AMID is confident of maintaining its liquidity and strong balance sheet even after this transaction. To ensure this, AMID has planned strategic divestments of non-core assets, mainly its terminalling services segment, valued approximately $400 million to $500 million. The funds from the asset sale plus incremental debt financing will allow the newly merged entity to aim for a pro-forma trailing debt versus EBITDA ratio of 4.5 times which would be reduced to 3.5 times within the next 12 to 18 months. The merged entity will also aim for a pro-forma liquidity of $300 million to $400 million.
AMID expects the transaction to be single-digit accretive to DCF/unit (discounted cash flow per unit) in FY18 and FY19, and double-digit accretive in FY20.
Benefits for AMID
The deal will allow AMID to transform into a fully integrated midstream player by linking natural gas and NGL supplies to high-growth markets along the US Gulf Coast. The deal allows AMID to expand its onshore gathering, processing, and transmission services in the highly economic Eagle Ford play and in the Southeast US gas transmission markets. The acquisition will extend AMID's commercial and operational capabilities and grow into a well-capitalized Company. The deal is expected to realize annual synergies of approximately $15 million to $20 million annually within 18 months of closing.
The deal will generate substantial cash flows from upstream activity and growing downstream demand and thereby grow its Distributable Cash Flow. The deal is in-line with AMID's strategy of investing in long-term high-growth assets and allows it to divest non-core assets thereby maintaining a strong balance sheet. The deal allows AMID to simplify its business and at the same time provide a solid DCF/unit profile and an expanded organic growth platform.
About American Midstream Partners, L.P.
AMID is a growth-oriented limited partnership formed to provide critical midstream infrastructure that links producers of natural gas, crude oil, NGL, condensate and specialty chemicals to end-use markets.
About Southcross Energy Partners, L.P.
Southcross Energy is a master limited partnership that provides natural gas gathering, processing, treating, compression, and transportation services and NGL fractionation and transportation services. It also sources, purchases, transports, and sells natural gas and NGL.
Last Close Stock Review
American Midstream Partners' share price finished yesterday's trading session at $13.15, slipping 4.01%. A total volume of 134.50 thousand shares have exchanged hands, which was higher than the 3-month average volume of 112.71 thousand shares. Shares of the Company have a dividend yield of 12.55% and currently have a market cap of $667.76 million.
On Thursday, November 02, 2017, the stock closed the trading session at $1.85, tumbling 7.96% from its previous closing price of $2.01. A total volume of 438.67 thousand shares have exchanged hands, which was higher than the 3-month average volume of 89.02 thousand shares. Southcross Energy Partners' stock price soared 37.05% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have skyrocketed 37.04%. At Thursday's closing price, the stock's net capitalization stands at $143.84 million.
Pro-Trader Daily:
Pro-Trader Daily (Pro-TD) produces regular sponsored and non-sponsored reports, articles, stock market blogs, and popular investment newsletters covering equities listed on NYSE and NASDAQ and Canadian stocks. PRO-TD has two distinct and independent departments. One department produces non-sponsored analyst certified content generally in the form of press releases, articles and reports covering equities listed on NYSE and NASDAQ and the other produces sponsored content (in most cases not reviewed by a registered analyst), which typically consists of compensated investment newsletters, articles, and reports covering listed stocks and micro-caps. Such sponsored content is outside the scope of procedures detailed below.
PRO-TD has not been compensated; directly or indirectly; for producing or publishing this document.
PRESS RELEASE PROCEDURES:
The non-sponsored content contained herein has been prepared by a writer (the "Author") and is fact checked and reviewed by a third party research service company (the "Reviewer") represented by a credentialed financial analyst [for further information on analyst credentials, please email contact@protraderdaily.com. Rohit Tuli, a CFA® charter-holder (the "Sponsor"), provides necessary guidance in preparing the document templates. The Reviewer has reviewed and revised the content, as necessary, based on publicly available information which is believed to be reliable. Content is researched, written and reviewed on a reasonable effort basis. The Reviewer has not performed any independent investigations or forensic audits to validate the information herein. The Reviewer has only independently reviewed the information provided by the Author according to the procedures outlined by PRO-TD. PRO-TD is not entitled to veto or interfere in the application of such procedures by the third-party research service company to the articles, documents or reports, as the case may be. Unless otherwise noted, any content outside of this document has no association with the Author or the Reviewer in any way.
NO WARRANTY
PRO-TD, the Author, and the Reviewer are not responsible for any error which may be occasioned at the time of printing of this document or any error, mistake or shortcoming. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from the use of this document. PRO-TD, the Author, and the Reviewer expressly disclaim any fiduciary responsibility or liability for any consequences, financial or otherwise arising from any reliance placed on the information in this document. Additionally, PRO-TD, the Author, and the Reviewer do not (1) guarantee the accuracy, timeliness, completeness or correct sequencing of the information, or (2) warrant any results from use of the information. The included information is subject to change without notice.
NOT AN OFFERING
This document is not intended as an offering, recommendation, or a solicitation of an offer to buy or sell the securities mentioned or discussed, and is to be used for informational purposes only. Please read all associated disclosures and disclaimers in full before investing. Neither PRO-TD nor any party affiliated with us is a registered investment adviser or broker-dealer with any agency or in any jurisdiction whatsoever. To download our report(s), read our disclosures, or for more information, visit http://protraderdaily.com/disclaimer/.
CONTACT
For any questions, inquiries, or comments reach out to us directly. If you're a company we are covering and wish to no longer feature on our coverage list contact us via email and/or phone between 09:30 EDT to 16:00 EDT from Monday to Friday at:
Email: contact@protraderdaily.com
Phone number: (917) 341.4653
Office Address: Mainzer Landstrasse 50 Frankfurt am Main, Germany 60325
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
SOURCE: Pro-Trader Daily
