Enterprise Products buys stake in Oiltanking and makes takeover offer

By ALEX NUSSBAUM
Bloomberg

Enterprise Products bought a stake in Oiltanking Partners and offered to buy the rest of the company in a proposal worth as much as $6 billion, the latest bet on the growing market for US energy exports.

Enterprise, the biggest US pipeline operator by market value, is buying a two-thirds stake in Oiltanking along with its general partner for about about $4.41 billion in cash and stock, the Houston-based companies said in separate statements.

It’s also offering 1.23 Enterprise units for each remaining Oiltanking unit. That would value the target at $49.57 a unit, 2 cents below the closing price.

Enterprise, which also stores and processes oil and natural gas, is Oiltanking Partners’ largest customer, accounting for about 30% of its sales last year. The merger would be the latest deal by a US fuel shipper to expand as the shale-fracking boom increases domestic supplies and draws interest from overseas buyers.

“Oiltanking’s marine terminal assets hold a unique and coveted position on the Houston Ship Channel,” said Aneesh Prabhu, a Standard & Poor’s credit analyst. The deal would “enhance the partnership’s access to waterborne markets” and help Enterprise grow exports of liquefied petroleum gas, refined products and chemicals.

‘Lusting’ for Assets

Oiltanking Holdings Americas, a subsidiary of Germany’s Oiltanking GmbH, is selling its 64.7% stake in the partnership, which owns oil terminals, storage and transportation facilities on the Houston Ship Channel and in Beaumont, Texas. Enterprise is also buying 2% of the general partner interest.

“We’ve been lusting after those assets for years,” Michael Creel, Enterprise’s CEO, said on a conference call with analysts. “We’ve done business with them so long. We know the people. We think it’s the perfect fit.”

Enterprise’s takeover offer for the rest of the company would value Oiltanking at $49.57/unit, according to Bloomberg calculations. Enterprise said that was an “at-market value” for the company in its statement, based on volume-weighted average trading prices.

Creel said Oiltanking investors would receive other benefits, including a 70% increase in quarterly distributions at the proposed exchange rate, a more diversified asset base and access to Enterprise’s lower financing costs.

Growth Platform

The deal provides the companies “a platform for growth well beyond either’s capabilities,” Jim Teague, Enterprise’s chief operating officer, said on the conference call.

Enterprise will pay for the stake using about $2.2 billion in units and $2.21 billion in cash, Oiltanking said in a statement.

“Oiltanking Holdings has been providing Enterprise with a variety of services in the Gulf Coast for more than 30 years and this transaction will continue our long-term relationship, but now as an Enterprise unitholder,” said Christian Flach, managing director of Oiltanking GmbH and now a director of Enterprise’s general partner.

In June, Energy Transfer, the Dallas-based pipeline conglomerate run by billionaire Kelcy Warren, was in talks to acquire Targa Resources, a natural-gas liquids exporter. The talks were terminated, Targa said at the time.

In another pipeline transaction this year, Williams Cos. agreed to pay $6 billion for control of Access Midstream, with plans to eventually merge the company with its subsidiary, Williams Partners.

Citigroup acted as financial adviser and Andrews Kurth and Akin Gump Strauss Hauer & Feld acted as legal counsel to Enterprise. Deutsche Bank acted as financial adviser and Vinson & Elkins and Skadden, Arps, Slate, Meagher & Flom and Associates served as legal advisers to Oiltanking Holdings.

• Most Read
• Most Commented