SemGroup® Corporation has executed a definitive agreement to acquire Houston Fuel Oil Terminal Company, the owner and operator of a 16.8-million-barrel terminal strategically located on 330 acres on the Houston Ship Channel along the U.S. Gulf Coast, from investment funds managed by Alinda Capital Partners.
“This is a transformational acquisition that adds tremendous stability to our business and provides a dynamic platform for growth,” said SemGroup President and CEO Carlin Conner. “Consistent with our strategy to diversify our portfolio and become more refinery facing, HFOTCO brings a well-established base of high-quality, long-tenured customers. At the same time, the terminal’s premier location on the Houston Ship Channel provides deep water access and is well positioned to capture increasing export volumes. With the addition of HFOTCO, SemGroup will be uniquely positioned to capture the future trends in exporting crude oil and refined products resulting from the near and long-term anticipated growth in U.S. shale production.”
Currently, Houston Fuel Oil Terminal Company is executing on contractually supported growth projects, including a new ship dock, a new pipeline and connections, as well as an additional 1.45 million barrels of crude oil storage, expected to be in service mid-2018.
Under the terms of the agreement, the total purchase consideration will consist of two payments. The first payment will be $1.5 billion at closing, including the assumption of an estimated $785 million of existing Houston Fuel Oil Terminal Company debt, and issuance of between $300 million to $400 million in common shares, at SemGroup’s election, to Alinda at $32.30 per share. The remainder of the initial payment will be funded in cash from SemGroup’s revolving credit facility. The second payment will consist of an additional $600 million which will be paid in cash before the end of 2018.
The transaction is expected to close in the third quarter of 2017, subject to the receipt of certain governmental approvals and the satisfaction of other customary closing conditions.