(Sept. 18) – Get ready for more fundraising by oil and gas-focused private equity funds as the sector recovers on the back of higher commodity prices.
First Reserve is planning a $3 billion raise for its 14th fund, according to a Reuters report last week. And Goldman Sachs-backed Riverstone Holdings hopes to put together $5 billion for its seventh fund, also per Reuters.
According to financial data provider Preqin, energy-focused private equity firms raised $213 billion between 2015 and 2017, up 36 percent over the previous three years.
Even so, two of the giants of oil and gas private equity investing seem to be tempering their expectations.
First Reserve’s new fund has a 11.7 percent smaller target than its 13th vehicle, which raised $3.4 billion (after targeting $5 billion). And Riverstone’s new fund is expected to be 2 percent smaller than its previous fund, which raised $5.1 billion. Blame poor returns during the downturn for the lower targets.
Meanwhile, transactions handled by Texas lawyers fell off considerably last week, with only nine deals versus 13 the previous week. And the value only amounted to $3.57 billion, 39 percent lower than the $5.9 billion hit the previous week.
The transactions were generated in more varied sectors than the usual oil and gas industry. Rental, healthcare, tradeshow, food and real estate deals all made a showing – evidence that Texas is no one-trick pony.
Only seven firms and 44 lawyers were involved in the deal flow, versus 10 firms and 131 lawyers the previous week, and all the transactions involved M&A and private equity. There weren’t any capital markets transactions – the second week in a row – except for an update to an initial public offering The Texas Lawbook had already covered. See the bottom of the story for more details.
Platinum Equity exits BlueLine Rental in $2.1B sale to United Rentals
United Rentals Inc. said Sept. 10 that it agreed to buy The Woodlands-based BlueLine Rental for about $2.1 billion in cash.
Latham & Watkins attorneys outside of Texas advised BlueLine’s private equity owner, Platinum Equity, which used Barclays and Catalyst Strategic for financial advice. Sullivan & Cromwell counseled United Rentals, whose financial advisors were Morgan Stanley and Centerview Partners.
BlueLine’s general counsel is Jeffrey Dunlop, who has been in that post since 2012. The Mercer- and NYU-trained lawyer previously was an associate at the Van Winkle Law Firm in Asheville, North Carolina, and Moore & Van Allen in Charlotte.
United Rentals claims that BlueLine is one of the 10 largest equipment rental companies in North America with 50,000 customers, 114 locations and 1,700 employees. It focuses on mid-sized and local accounts in the construction and industrial sector.
For the 12 months ending Aug. 31, BlueLine generated an estimated $313 million in adjusted Ebitda at a 39.8 percent margin on $786 million in revenue. United Rentals said BlueLine’s fleet will expand its own by 46,000 rental assets with an original cost of $1.5 billion.
The price came at a 6.7 times trailing multiple of Ebitda – or 5.4 times including $45 million in cost synergies and net present value of tax attributes estimated at $169 million.
The parties expect the transaction to close in the fourth quarter if it clears Hart-Scott Rodino. United Rentals plans to pay for it through newly issued debt and bank loans.
V&E advises Carlyle on $620M funding to Diamondback
Vinson & Elkins said Sept. 11 it advised the Carlyle Group on its agreement to fund the development of Diamondback Energy Inc.’s oil and gas assets in the San Pedro area of Pecos County, Texas, within the Southern Delaware basin.
The V&E team was led by partner Mingda Zhao with senior associate Emery Choi and associates Emma Jiang and Cesar Leyva. Also advising were partner Todd Way and senior associate Julia Pashin (tax); partner Larry Nettles (environmental); partner Shamus Crosby (M&A); and senior associate James Longhofer (finance).
Akin Gump Strauss Hauer & Feld assisted Diamondback, including oil and gas partners Michael Byrd and David Sweeney and counsel Stephen Boone in Houston.
Others on the team were tax partners Alison Chen and Jocelyn Tau in Houston and corporate partners Seth Molay and Alan Laves, counsel Rachel Evans and associate Meagan Lanier in Dallas.
UBS was Diamondback’s financial advisor.
As part of the joint venture, Carlyle Energy Mezzanine Opportunities Fund II will fund up to 85 precent for the development program over five years. If Diamondback achieves certain performance hurdles, Carlyle’s working interests will largely revert to the company.
Vince Hahn led the funding from Carlyle out of Boston.
Diamondback CEO Travis Stice said in a statement that the venture will allow the company to bring forward present value on the southeastern portion of its Pecos County acreage and will benefit its minerals and midstream businesses.
K&E advises Macquarie on $500M investment in Lagoon
Kirkland & Ellis said Sept. 11 that it counseled Macquarie Group unit Macquarie Infrastructure Partners on its investment of up to $500 million in Lagoon Water Solutions Holdings.
The Kirkland team included corporate partner John Pitts, associates Kyle Watson, Brice Lipman and Daniel Cadis and tax partner David Wheat. Phillips Murrah in Oklahoma represented Lagoon.
Karl Kuchel led the investment from Macquarie out of New York.
Oklahoma City-based Lagoon was founded by president and CEO Blaine Dyer and chief commercial officer Gage Herrmann last year. The company works with oil and gas producers to reduce their operating costs by investing in, constructing and operating water midstream infrastructure.
The company’s focus is on the Stack and Scoop basins in Oklahoma. It has 100 employees.
V&E, Orrick advise on Targa’s $160M sale of refining facilities to ArcLight
Vinson & Elkins said Sept. 12 it advised Targa Resources Corp. on its agreements to sell its refined products and crude oil storage and terminaling facilities in Tacoma, Washington and Baltimore, Maryland, to an affiliate of ArcLight Capital Partners for $160 million.
The V&E corporate team was led by senior associate Matt Falcone with assistance from partner Chris Collins and associates Brittany Smith and Greg Henson.
Others in the group were partner Stephen Jacobson and associate Kristy Fields (executive compensation/benefits); partner Jim Meyer and associate Brian Russell (tax); and counsel Larry Pechacek and associate Jennifer Cornejo (environmental).
Evercore’s Rob Pacha in Houston provided Targa with financial advice on the transaction.
Orrick counseled ArcLight, including partners Blake Winburne and Brad Gathright in Houston.
The parties expect to close the sale in the fourth quarter. Targa plans to use the proceeds to fund part of its growth capital program that’s underway.
Targa said in March it might sell the assets along with others to fund its equity needs for projects this year.
Winston counsels NGL Energy on $93M acquisition of New Mexico ranchland
NGL Energy Partners said Sept. 10 it bought 122,000 acres of ranch land in New Mexico for $93 million, giving it access to water sources and disposal.
Winston & Strawn partner Chris Ferazzi in Houston led the deal for Tulsa-based NGL along with an attorney’s in the firm’s Chicago office.
NGL purchased the Beckham and McCloy ranches, including 20 saltwater disposal well locations and 11.6 million barrels of annual fresh water rights. The partnership said the acquisitions will give oil and gas producers in Eddy and Lea counties more options for water sourcing and disposal.
NGL said it’s in the process of developing multiple water pipelines, including the Lea County Express Pipeline that will originate near the ranches and transport produced water to NGL water disposal facilities in Texas and New Mexico.
Jones Day aids Great Elm on $63.6M purchase of healthcare firms
Jones Day said Sept. 13 that Dallas partner Alain Dermarkar advised Great Elm Capital Group Inc. on its $63.6 million acquisition of Valley Healthcare Group and Northwest Medical.
Winston & Strawn counseled Northwest Medical out of Chicago and Carson Messinger in Phoenix represented Valley Healthcare.
Waltham, Mass.-based Great Elm said the deals form a top provider of sleep and respiratory-focused durable medical equipment and services. The combination will have operations in Arizona, Nebraska, Washington, Oregon and Alaska and serve 70,000 patients per year.
The combination generated sales of $47.1 million, net income of $3.4 million and pro forma adjusted Ebitda of $12.9 million for the 12 months ending June 30.
The purchase price works out to 4.9 times Ebitda. Great Elm said it expects to realize operational synergies for the combined companies, which are its first operating company acquisition.
Valley Healthcare has bought seven companies since Ron and Pam Evans co-founded the company in 2006.
Corbel Capital Partners, which backed Northwest Medical, will be a lender and minority shareholder of the combined company.
Up to $2.4 million of deferred purchase price consideration may be paid to the sellers if they achieve increased financial targets this year and next.
Great Elm is in investment management and real estate.
Jones Day advises Mill Creek Residential on $37.25M acquisition
Jones Day said Sept. 10 that Dallas partner Susan Cox advised Mill Creek Residential Trust on its $37.25 million acquisition of the 127-unit apartment complex Aqua Isles in Fort Lauderdale.
The seller was Principal Real Estate Investors, an arm of insurance giant Principal Financial Group. Walker & Dunlop Investment Sales advised it on the sale.
According to the South Florida Business Journal last month, Mill Creek financed the deal with a $24.35 million mortgage from MetLife Real Estate Lending.
The complex was developed and sold in 2012 for $20.24 million, the publication said.
Winston advises Kainos’ Florida Food on sale to MidOcean Partners
Dallas food and consumer-focused private equity firm Kainos Capital said Sept. 11 it sold Florida Food Products to an affiliate of MidOcean Partners for an undisclsoed sum.
Winston & Strawn advised Florida Food Products with a team that included Texas partners Christina Tate (M&A), Brett Johnson (IP), Chip Gage (finance) and Jeff Smith (real estate).
Florida Food’s financial advisor was Houlihan Lokey with a banker out of its Chicago office.
Gibson Dunn represented New York-based MidOcean with lawyers outside of Texas.
Headquartered in Eustis, Florida, Florida Food is a formulator and manufacturer of vegetable- and fruit-based ingredients providing clean label solutions to the food, beverage and pet nutrition industries.
The 60-year-old company was founded by the Brown family. Kainos purchased part of it in 2016, bringing in CEO Jim Holdreith to lead it through its next growth phase.
Kainos managing partner Andrew Rosen and partner Kevin Elliott were both involved in the investment.
Kainos has invested more than $2 billion in equity in 60 transactions valued at $10 billion. The firm typically invests $50 million to $150 million per portfolio company.
Kainos’ other food-related investments include Milk Specialties Global, InterHealth Nutraceuticals and Kettle Cuisine.
Gibson Dunn advises MidOcean on its purchase of Questex
MidOcean Partners also announced Sept. 12 that it had acquired business information and events company Questex Intermediate Holdings Inc. from Shamrock Capital for an undisclosed sum.
Gibson Dunn also worked for MidOcean on that deal with a team that included Dallas corporate associate Louis Matthews.
Kirkland & Ellis was Questex’s legal advisor while Jefferies was its financial advisor.
MidOcean said the investment will be used to drive the company’s continued growth.
Massachusetts-based Questex serves the beauty/spa/wellness, travel/hospitality, life sciences/healthcare and telecommunications/technology sectors through 125 trade shows, conferences and hosted buyer events.
David Kieselstein, chairman of MidOcean’s private equity executive board, previously was CEO of Penton, a former MidOcean portfolio company that was sold to Informa plc in 2016 for $1.6 billion. Kieselstein will serve as chairman of Questex’s board.
Questex will be led by incoming CEO Paul Miller, who was president of Penton’s industry group.
Questex’s current CEO will be a senior advisor to the company. CFO Debra Mason is staying on. MidOcean managing director Barrett Gilmer also was involved in the investment.
UPDATE:
The Texas Lawbook reported back in July that NGP Energy Capital Management-backed Remora Royalties had filed for a $100 million initial public offering.
The Austin-based company revealed in a filing with the Securities and Exchange Commission Sept. 10 that it plans to sell 5.3 million shares priced between $19 to $21, which would raise $106 million at the midpoint. It aims to list on the Nasdaq under the symbol RRI.
The same lawyers are counseling Remora, including Sidley Austin partners George Vlahakos and Jon Daly, who both joined the firm from Andrews Kurth last year. Latham & Watkins partners Ryan Maierson and John Greer in Houston are assisting the underwriters, which include RBC Capital Markets, Wells Fargo and UBS.
Led by CEO George Peyton, the company owns stakes in 3,600 gross producing wells in 12 states and 13 onshore basins, mostly in the Midcontinent, South Texas/Gulf Coast, East Texas/North Louisiana and Permian. It generated sales of $36.1 million last year.