[Context: On November 2, Vitol and IFM Investors announced a deal to acquire Buckeye Partners’ (NYSE: BPL) stake in VTTI. In a separate release, Buckeye disclosed it would receive $975m for its stake. Further details, advisors and related links are below.]
VTTI | Vitol | IFM Investors
Vitol and IFM to acquire 50% of VTTI from Buckeye
Vitol today announces that Vitol Investment Partnership II Ltd (“VIP”), an investment vehicle sponsored and managed by Vitol, and IFM Investors (“IFM”), a global institutional funds manager, have agreed to acquire Buckeye Partners LP’s 50% equity interest in VTTI BV, the leading global independent provider of energy storage.
On completion, VTTI will be owned 50% by IFM and 50% by Vitol and VIP. It will continue to be managed by an independent management team led by Rob Nijst.
The transaction is subject to certain conditions precedent and is expected to close by year end.
Vitol is an energy and commodities company; its primary business is the trading and distribution of energy products globally – it trades over seven million barrels per day of crude oil and products and, at any time, has 250 ships transporting its cargoes.
Vitol’s clients include national oil companies, multinationals, leading industrial and chemical companies and the world’s largest airlines. Founded in Rotterdam in 1966, today Vitol serves clients from some 40 offices worldwide and is invested in energy assets globally including: circa 18mm3 of storage across seven continents, 480kbpd of refining capacity and 5,000 service stations across Africa, Australia, Eurasia and in Northwest Europe. Revenues in 2017 were $181 billion.
IFM Investors is a global institutional funds manager with approximately US$82 billion under its management as of September 30, 2018. Established more than 25 years ago and owned by 27 Australian pension funds, IFM Investors’ interests are deeply aligned with those of its investors. Investment teams in Australia, Europe, North America and Asia manage institutional strategies across debt investments, infrastructure, listed equities and private equity. IFM Investors is committed to the United Nations supported Principles for Responsible Investment and has been a signatory since 2008. IFM Investors has offices in nine cities: Melbourne, Sydney, New York, London, Berlin, Zurich, Tokyo, Hong Kong, and Seoul.
Buckeye Partners, L.P. Announces Outcome of Strategic Review
HOUSTON, Nov. 02, 2018 (GLOBE NEWSWIRE) — Buckeye Partners, L.P. (“Buckeye”) (NYSE: BPL) announced today that as a result of its strategic review it is taking several actions designed to: (1) maintain Buckeye’s investment grade credit rating by reducing leverage; (2) provide increased financial flexibility, eliminating the need for Buckeye to access the public equity markets to fund annual growth capital; and (3) reallocate capital to the higher return growth opportunities across our remaining assets. The actions consist of:
>>The execution of a definitive agreement to sell its entire equity interest in VTTI B.V. (“VTTI”) for cash proceeds of $975 million.
>>The execution of a definitive agreement to sell a package of non-integrated domestic pipeline and terminal assets (collectively, the “Asset Package”) for cash proceeds of $450 million.
>>The reduction of Buckeye’s quarterly cash distribution to $0.75 per unit or $3.00 per unit on an annual basis.
The sale of both Buckeye’s VTTI equity interest and the Asset Package are expected to close by year end, subject to customary closing conditions including regulatory approvals. The Asset Package includes: a jet fuel pipeline from Port Everglades, Florida to the Ft. Lauderdale and Miami, Florida airports; pipelines and terminal facilities serving the Reno, Nevada; San Diego, California and Memphis, Tennessee airports; and refined petroleum products terminals in Sacramento and Stockton, California.
“I am confident that the actions taken as a result of our strategic review will not only strengthen our balance sheet and solidify our investment grade rating but also meaningfully improve distribution coverage,” stated Clark C. Smith, Chairman, President and Chief Executive Officer. “We are now well positioned to fund our annual growth capital spend without accessing the public equity markets. In addition, the sales of our interest in VTTI and the domestic Asset Package allow us to reallocate available growth capital to higher return initiatives across our domestic assets, particularly the opportunities we are actively pursuing along the U.S. Gulf Coast. Our improved financial flexibility along with our remaining portfolio of pipeline and terminal assets and attractive growth opportunities are expected to provide solid long-term returns for our unitholders through all business cycles.”
Third Quarter 2018 Financial Results. Buckeye also announced today its financial results for the third quarter of 2018. Buckeye reported a net loss attributable to Buckeye’s unitholders for the third quarter of 2018 of $745.8 million compared to net income attributable to Buckeye’s unitholders for the third quarter of 2017 of $116.2 million. The third quarter of 2018 was negatively impacted by a $537.0 million non-cash goodwill impairment charge, related primarily to our Caribbean assets, following an interim assessment of the recoverability of goodwill that was initiated in conjunction with the completion of the strategic review. In addition, the results reflect a $300.3 million non-cash loss related to the anticipated sale of our equity investment in VTTI. Adjusted EBITDA (as defined below) for the third quarter of 2018 was $253.7 million compared to $277.3 million for the third quarter of 2017.
The net loss attributable to Buckeye’s unitholders was $4.86 per diluted unit for the third quarter of 2018 compared to net income attributable to Buckeye’s unitholders of $0.81 per diluted unit for the third quarter of 2017. The diluted weighted average number of units outstanding in the third quarter of 2018 was 153.5 million compared to 142.8 million in the third quarter of 2017.
“Buckeye’s third quarter results fell short of prior year largely as a result of continued weakness in segregated storage, particularly in the Caribbean,” said Mr. Smith. “Our Domestic Pipelines and Terminals segment saw strong demand across the markets in which we operate, which drove increased pipeline and terminalling throughput volumes and increased revenues. The improved operating results for the segment were offset by the impact of the expiration of a crude-by-rail contract at our Chicago Complex in the first quarter of 2018 as well as expenses associated with two product releases that occurred during the quarter. Our Global Marine Terminals segment continued to benefit from strong operating performance from Buckeye Texas Partners, partially offsetting the continued impact of challenging market conditions in the segregated storage market, which drove lower utilization and rates in this segment. Our Buckeye Merchant Services segment faced weaker market conditions, primarily in the distillate market, but delivered positive results during the quarter and continues to drive increased utilization across our portfolio of assets.”
Distributable cash flow (as defined below) for the third quarter of 2018 was $156.9 million compared to $181.9 million for the third quarter of 2017. Buckeye also reported distribution coverage of 1.35 times for the third quarter of 2018.
Distribution. Buckeye also announced today that its general partner declared a cash distribution of $0.75 per LP Unit for the quarter ended September 30, 2018, compared to $1.2625 per LP Unit for the year ago quarter. As a result of the distribution reduction, the 6.7 million Class C Units outstanding as of September 30, 2018 will convert into LP Units on a one-for-one basis on November 5, 2018. The distribution will be payable on November 20, 2018 to unitholders of record on November 13, 2018. Buckeye has paid distributions in each quarter since its formation in 1986.
Intrepid Partners, LLC and Wells Fargo Securities, LLC acted as financial advisors to Buckeye in connection with the strategic review and the sale of its interest in VTTI and the Asset Package. In addition, Intrepid Partners, LLC provided a fairness opinion to the Board of Directors of Buckeye GP LLC, the general partner of Buckeye, in connection with the VTTI transaction.
About Buckeye Partners, L.P.
Buckeye Partners, L.P. (NYSE: BPL) is a publicly traded master limited partnership which owns and operates, or owns a significant interest in, a diversified global network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage, processing and marketing of liquid petroleum products. Buckeye is one of the largest independent liquid petroleum products pipeline operators in the United States in terms of volumes delivered, with approximately 6,000 miles of pipeline. Buckeye also uses its service expertise to operate and/or maintain third-party pipelines and perform certain engineering and construction services for its customers. Buckeye’s global terminal network, including through its interest in VTTI B.V. (“VTTI”), comprises more than 135 liquid petroleum products terminals with aggregate tank capacity of over 178 million barrels across our portfolio of pipelines, inland terminals and marine terminals located primarily in the East Coast, Midwest and Gulf Coast regions of the United States as well as in the Caribbean, Northwest Europe, the Middle East and Southeast Asia. Buckeye’s global network of marine terminals enables it to facilitate global flows of crude oil and refined petroleum products, offering its customers connectivity between supply areas and market centers through some of the world’s most important bulk liquid storage and blending hubs. Buckeye’s flagship marine terminal in The Bahamas, Buckeye Bahamas Hub, is one of the largest marine crude oil and refined petroleum products storage facilities in the world and provides an array of logistics and blending services for the global flow of petroleum products. Buckeye’s Gulf Coast regional hub, Buckeye Texas Partners, offers world-class marine terminalling, storage and processing capabilities. Through its 50% equity interest in VTTI, Buckeye’s global terminal network offers premier storage and marine terminalling services for petroleum product logistics in key international energy hubs. Buckeye is also a wholesale distributor of refined petroleum products in certain areas served by its pipelines and terminals. As discussed in this press release, we expect to divest our equity interest in VTTI during the fourth quarter of 2018, subject to normal regulatory approvals.