Energy Transfer and Crestwood Equity Partners announced Wednesday that they inked an agreement in which Energy Transfer will acquire Crestwood in an all-equity transaction valued at $7.1 billion, including $3.3 billion of assumed debt.
Crestwood common unitholders would receive 2.07 Energy Transfer common units for each Crestwood common unit, implying a no-premium, $26.40 per unit takeout, analysts at TPH said in a report on Thursday. Once the deal is completed, Crestwood common unitholders will own about 6.5 percent of Energy Transfer’s outstanding common units.
The transaction is expected to close in the fourth quarter once it receives approval from Crestwood’s shareholders and regulators.
BofA Securities advised Energy Transfer while Intrepid Partners and Evercore assisted Crestwood.
Kirkland & Ellis counseled Energy Transfer with a team led by corporate partners Debbie Yee, Sean Wheeler and Camille Walker. The group also included tax partners David Wheat and Joe Tobias, capital markets partners Julian Seiguer and Atma Kabad, executive compensation partners Rob Fowler and Stephanie Jeane and debt finance partner Rachael Lichman.
Jim Wright is general counsel of Energy Transfer, where he has been part of the legal team since 2005. Before that, he worked for Enterprise Products Partners, El Paso Corp., Sonat Exploration Co. and KPMG Peat Marwick.
Vinson & Elkins counseled Crestwood led by partners Sarah Morgan, Steve Gill and Ramey Layne and senior associate David Bumgardner with assistance from associates Chandler Jones, Phil Greenfield, Matthew Rando and Shelby Shearer.
The V&E support team included partners John Lynch and Ryan Carney, counsel Peter Rogers and associate Dan Henderson (tax); partner Shane Tucker and associates Maddison Riddick and Hayden Rutledge (executive compensation/benefits); partner Hill Wellford, senior associate Ryan Will and associate Rami Rashmawi (antitrust); partner Becky Baker and associate Ashley Plunk (employment/labor); and senior associate Lucy Liu (corporate).
Evercore was advised by Bracewell led by Houston partner Will Anderson, along with associates Andrew Monk and Chase Edmunds.
Joel Lambert is chief legal and compliance officer at Crestwood. Before joining Crestwood in 2013, Lambert was VP of legal at First Reserve and was an associate at V&E in Houston and Moscow.
Lambert was previously an Intern for Chief Justice Tom Phillips on the Texas Supreme Court and a Russian linguist and military intelligence specialist for the U.S. Army. He served in Iraq and Saudi Arabia during Desert Shield and Desert Storm.
Energy Transfer’s agreement to purchase Crestwood is neutral to its credit quality and represents a positive move strategically, according to Fitch Ratings.
“Prominently, Crestwood has multiple types of assets in North Dakota which operate next to or close to the well-head. In North Dakota ET [Energy Transfer] operates a large crude oil take-away line,” the agency said. “Overall, Fitch regards the Crestwood transaction as a sound bolt-on acquisition.”
If consummated, the transaction would extend Energy Transfer’s position in the value chain deeper into the Williston and Delaware basins while also providing entry into the Powder River basin, the parties noted.
The assets are expected to complement Energy Transfer’s downstream fractionation capacity at Mont Belvieu and its hydrocarbon export capabilities from its Nederland Terminal in Texas and the Marcus Hook Terminal in Philadelphia, the parties added. The transaction also should benefit Energy Transfer’s NGL and refined products and crude oil businesses with the addition of storage and terminal assets and trucking and rail terminals.
Financially, the transaction is expected to be immediately accretive to distributable cash flow per unit and neutral to Energy Transfer’s leverage metrics upon closing. Similar to Energy Transfer, Crestwood’s cash flows are supported by primarily fee-based revenues from long-term contracts with investment-grade counterparties.
With the increased scale and strengthened balance sheet, Energy Transfer expects to be able to improve on the current cost of financing for the acquired debt securities. Energy Transfer also expects to achieve at least $40 million of annual run-rate cost synergies before additional benefits of financial and commercial opportunities.