• Andeavor Logistics to acquire Western Refining
Logistics in a unit-for-unit transaction for a total enterprise
value of $1.8 billion, including net debt
Andeavor (NYSE:ANDV), Andeavor Logistics LP (NYSE:ANDX) and Western
Refining Logistics, LP (NYSE:WNRL) today announced the merger of
Andeavor Logistics and Western Refining Logistics and the financial
repositioning of Andeavor Logistics through a buy-in of Andeavor
Logistics’ incentive distribution rights (“IDRs”). These
transactions will generate approximately 93 million newly issued
ANDX common units to Andeavor, which will bring Andeavor’s total
ownership to approximately 127 million units.
Andeavor Logistics and WNRL jointly announced a
definitive merger agreement whereby Andeavor Logistics will acquire
WNRL in a unit-for-unit exchange (“Merger”) at a blended exchange
ratio of 0.4921, representing an equity value of $1.5 billion based
on Andeavor Logistics closing unit price of $48.31 on August 11,
2017. This represents an enterprise value of $1.8 billion,
including the assumption of approximately $310 million of WNRL’s
net debt. The estimated 2018 EBITDA multiple is approximately 8.6x,
excluding estimated 2018 GP/IDR distributions for WNRL of $22
million.
Andeavor and Andeavor Logistics also announced
an agreement for Andeavor Logistics to issue, conditional upon the
closing of the Merger, 78.0 million ANDX common units to Andeavor
in exchange for the cancellation of Andeavor Logistics’ IDRs (“IDR
Buy-In”). The IDR Buy-In is expected to take place immediately
after the Merger. These transactions have been approved by the
boards of directors of all three companies as well as the conflicts
committees of both MLPs.
“Andeavor Logistics is well positioned for
sustainable growth through the execution of our organic growth
programs and strategic acquisitions, including drop downs from
Andeavor,” said Greg Goff, Chairman and CEO of Andeavor, and Chief
Executive Officer of Andeavor Logistics’ and WNRL’s general
partners. “The transactions announced today significantly improve
the financial strength of Andeavor Logistics, reduce our cost of
capital and clearly highlight the value of this growth
business."
“These transactions create significant value for
Andeavor shareholders and Andeavor Logistics unitholders, and offer
Western Refining Logistics unitholders the opportunity to
participate in the future growth of the combined logistics entity,"
added Goff.
The Merger TransactionUnder the
terms of the Merger agreement, WNRL unitholders will receive an
exchange ratio of 0.5233 ANDX common units for each WNRL common
unit held. The exchange ratio of 0.5233 is valued
at $25.28 per WNRL common unit, reflecting a premium of
6.4% based on WNRL’s closing unit price on August 11, 2017. It also
represents a 6.9% premium to the volume weighted average closing
price over the last 30 trading days.
Andeavor’s effective implied exchange ratio is
0.4639 ANDX common units for each WNRL common unit held by
Andeavor. This represents no premium to the exchange ratio based on
ANDX’s and WNRL’s closing unit prices on April 13, 2017, one
trading day prior to Andeavor Logistics’ April 17, 2017 initial 13D
filing. The effective implied exchange ratio is achieved by
Andeavor’s agreement to cancel 3.6 million WNRL common units.
The effective blended exchange ratio is 0.4921
ANDX common units for each WNRL common unit. The effective blended
exchange ratio is valued at $23.77 per WNRL common
unit.
The IDR Buy-In TransactionUnder
the terms of the IDR Buy-In agreement, and immediately following
the close of the Merger, Andeavor Logistics will issue 78.0 million
ANDX common units to Andeavor in exchange for the cancellation of
Andeavor Logistics’ IDRs and the conversion of its economic general
partner interest into a non-economic general partner interest.
Following the IDR Buy-In, Andeavor will continue to own the
non-economic general partner interest in Andeavor Logistics and
hold approximately 127 million ANDX common units, representing
approximately 59% of the common units outstanding.
The 78.0 million ANDX common units represent
$3.8 billion in value based on Andeavor Logistics closing unit
price of $48.31 on August 11, 2017 and $4.0 billion in value based
on the volume weighted average closing price over the last 30
trading days. This represents a multiple of 13.1x on 2018 estimated
GP/IDR distributions for Andeavor Logistics and WNRL, combined, of
$287 million, excluding distributions waivers, based on Andeavor
Logistics closing unit price on August 11, 2017. This also
represents a GP/IDR multiple of 14.0x on the volume weighted
average closing price over the last 30 trading days.
Additionally, Andeavor has agreed to increase
existing distribution waivers in 2017-2019 by $60 million to $160
million, consisting of:
- $50 million in 2017 (no change)
- $60 million in 2018 ($10 million increase)
- $50 million in 2019 ($50 million increase)
These waivers strongly position Andeavor
Logistics for accelerated near-term distributable cash flow
accretion while maintaining strong financial metrics following the
IDR Buy-In.
Strategic Rationale
- Greater Organic Growth Opportunities Across the
Combined Geographic Footprint: Andeavor Logistics plans to
spend at least $500 to $600 million per year on organic growth and
acquisitions with a current two-year backlog of $800 to $900
million of identified organic growth projects. The entry into the
prolific Permian Basin positions Andeavor Logistics to capture
additional organic growth opportunities. The Conan Crude Oil
Pipeline System in the Delaware Basin, announced on August 11,
2017, with a capital investment of approximately $225 million, is
indicative of the organic growth opportunities for the business.
This project is being constructed by Andeavor and is expected to be
offered to Andeavor Logistics upon completion.
- Robust Drop Down Portfolio of Qualified
Assets: Andeavor Logistics targets investing $400 to $500
million per year on drop downs, as Andeavor has a drop down
portfolio of at least $750 million of estimated annual earnings.
This portfolio includes earnings from refinery infrastructure of at
least $150 million, logistics assets of at least $200 million,
assets under development of at least $150 million and Andeavor’s
wholesale fuels business of at least $250 million.
- Enhanced Distribution Growth, Distribution Coverage and
Credit Metrics: Andeavor Logistics targets long-term,
sustainable annual distribution growth of 6% or greater, a
distribution coverage ratio of approximately 1.1x and
debt-to-EBITDA at or below 4.0x by the end of 2017.
- Enhanced Capital Structure and Improved Cost of
Capital: The transactions strengthen the credit profile
and position Andeavor Logistics for an investment grade credit
rating. The IDR Buy-In also lowers the marginal cost of capital and
reduces the need to access public equity markets while expanding
the universe of economic growth opportunities.
- Better Alignment and More Transparent Value:
Together, these transactions, simplify the corporate structure,
resulting in Andeavor owning approximately 59% of Andeavor
Logistics, valued at $6.1 billion, based on the closing unit price
on August 11, 2017. Additionally, these transactions achieve
expected distributable cash flow accretion by the second half of
2019 for Andeavor Logistics unitholders and deliver a significant
value proposition for all stakeholders.
LeadershipUpon closing, Greg
Goff will continue to serve as Chairman and Chief Executive Officer
and Steven Sterin as President and Chief Financial Officer of the
general partner of Andeavor Logistics.
Approvals and TimingThe Merger
transaction and IDR Buy-In is expected to close in the fourth
quarter 2017 and the Merger is subject to customary closing
conditions, including regulatory and approval from holders of a
majority of the WNRL units.
Public Invitation to Conference Call and
WebcastAndeavor, Andeavor Logistics and WNRL will live
broadcast a conference call at 7:00 a.m. CT (8:00 a.m. ET) today to
discuss the transactions. Interested parties may listen to the
conference call by logging on to http://www.andeavor.com,
http://www.andeavorlogistics.com or http://www.wnr.com/wnrl.
AdvisorsGoldman Sachs & Co.
LLC is serving as lead financial advisor, Evercore is serving as
financial advisor and Sullivan & Cromwell LLP is serving as
legal advisor to Andeavor. J.P. Morgan Securities LLC is serving as
financial advisor to the Conflicts Committee of Andeavor Logistics
and Andrews Kurth Kenyon LLP is serving as its legal advisor.
Latham & Watkins LLP is serving as legal advisor to Andeavor
Logistics for the transactions. Citi is serving as financial
advisor to the Conflicts Committee of Western Refining Logistics
and Bracewell LLP is serving as its legal advisor. Vinson &
Elkins LLP is serving as legal advisor to Western Refining
Logistics for the transaction.
About AndeavorAndeavor is a
premier, highly integrated marketing, logistics and refining
company. Andeavor's retail-marketing system includes more than
3,100 retail stations marketed under multiple well-known fuel
brands, including ARCO®, SUPERAMERICA®, Shell®, Exxon®, Mobil®,
Tesoro®, USA Gasoline(TM) and Giant®. It also has ownership in two
logistics businesses, which include Andeavor Logistics LP
(NYSE:ANDX) and Western Refining Logistics, LP (NYSE:WNRL) and
ownership of their general partners. Andeavor operates 10
refineries with a combined capacity of approximately 1.2 million
barrels per day in the mid-continent and western United States.
About Andeavor Logistics
LPAndeavor Logistics LP is a leading full-service
logistics company operating primarily in the mid-continent and
western United States. Andeavor Logistics owns and operates a
network of crude oil, refined products and natural gas pipelines.
Andeavor Logistics also owns and operates crude oil and refined
products truck terminals, marine terminals and dedicated storage
facilities. In addition, Andeavor Logistics owns and operates
natural gas processing and fractionation complexes. Andeavor
Logistics is a fee-based, growth oriented Delaware limited
partnership formed by Andeavor and is headquartered in San Antonio,
Texas.
About Western Refining Logistics,
LPWestern Refining Logistics, LP is a growth-oriented
master limited partnership formed to own, operate, develop and
acquire terminals, storage tanks, pipelines and other logistics
assets related to the terminalling, transportation and storage of
crude oil and refined products. Headquartered in El Paso, Texas,
Western Refining Logistics, LP's assets include approximately 705
miles of pipelines, approximately 12.4 million barrels of active
storage capacity, distribution of wholesale petroleum products and
crude oil and asphalt trucking.
Forward Looking StatementsThis
communication contains certain statements that are
“forward-looking” statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act
of 1934. Words such as “may,” “will,” “could,” “anticipate,”
“estimate,” “expect,” “predict,” “project,” “future,” “potential,”
“intend,” “plan,” “assume,” “believe,” “forecast,” “look,” “build,”
“focus,” “create,” “work” “continue” or the negative of such terms
or other variations thereof and words and terms of similar
substance used in connection with any discussion of future plans,
actions, or events identify forward-looking statements. These
forward-looking statements include, but are not limited to,
statements regarding the proposed acquisition by Andeavor Logistics
of WNRL, synergies and the shareholder value to result from the
combined company, and the proposed buy-in of Andeavor Logistics’
incentive distribution rights by Andeavor in exchange for common
units of Andeavor. There are a number of risks and uncertainties
that could cause actual results to differ materially from the
forward-looking statements included in this communication. For
example, the risk that the proposed transactions do not occur,
expected timing and likelihood of completion of the proposed
transactions, including the timing, receipt and terms and
conditions of any required governmental and regulatory approvals of
the proposed acquisition that could reduce anticipated benefits or
cause the parties to abandon the transactions, the ability to
successfully integrate the businesses, the occurrence of any event,
change or other circumstances that could cause the parties to
abandon the transactions, risks related to disruption of management
time from ongoing business operations due to the proposed
transactions, the risk that any announcements relating to the
proposed transaction could have adverse effects on the market price
of Andeavor Logistics’ common units, WNRL’s common units or
Andeavor’s common stock, the risk that the proposed transaction and
its announcement could have an adverse effect on the ability of
Andeavor Logistics, WNRL and Andeavor to retain customers and
retain and hire key personnel and maintain relationships with their
suppliers and customers and on their operating results and
businesses generally, the risk that problems may arise in
successfully integrating the businesses of the companies, which may
result in the combined company not operating as effectively and
efficiently as expected, the risk that the combined company may be
unable to achieve cost-cutting synergies or it may take longer than
expected to achieve those synergies, the risk of the amount of any
future distribution Andeavor Logistics may pay, and other factors.
All such factors are difficult to predict and are beyond Andeavor
Logistics’ or Andeavor’s control, including those detailed in
Andeavor Logistics’ annual reports on Form 10-K, quarterly reports
on Form 10-Q and current reports on Form 8-K that are available on
its website at http://andeavorlogistics.com/ and on the SEC’s
website at http://www.sec.gov, those detailed in WNRL’s annual
reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K that are available on WNRL’s website at
http://www.wnrl.com and on the SEC website at http://www.sec.gov
and those detailed in Andeavor’s website at http://andeavor.com and
on the SEC’s website at http://www.sec.gov. Andeavor Logistics’,
WNRL’s and Andeavor’s forward-looking statements are based on
assumptions that Andeavor Logistics, WNRL and Andeavor believe to
be reasonable but that may not prove to be accurate. Andeavor
Logistics, WNRL and Andeavor undertake no obligation to publicly
release the result of any revisions to any such forward-looking
statements that may be made to reflect events or circumstances that
occur, or which we become aware of, except as required by
applicable law or regulation. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date hereof.
No Offer or Solicitation: This
communication relates to a proposed business combination between
WNRL and Andeavor Logistics and a proposed transaction between
Andeavor Logistics and Andeavor. This communication is for
informational purposes only and is neither an offer to purchase,
nor a solicitation of an offer to sell, any securities in any
jurisdiction pursuant to the proposed transactions or otherwise,
nor shall there be any sale, issuance or transfer or securities in
any jurisdiction in contravention of applicable law. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended.
Additional Information and Where to Find
It: Andeavor Logistics and WNRL intend to file a
registration statement on Form S-4, containing a consent
statement/prospectus (the “S-4”) with the SEC. This communication
is not a substitute for the registration statement, definitive
consent statement/prospectus or any other documents that Andeavor
Logistics, WNRL or Andeavor may file with the SEC or send to
unitholders in connection with the proposed transaction.
UNITHOLDERS OF ANDEAVOR LOGISTICS AND WNRL AND SHAREHOLDERS OF
ANDEAVOR ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE
SEC, INCLUDING THE FORM S-4 AND THE DEFINITIVE CONSENT
STATEMENT/PROSPECTUS INCLUDED THEREIN IF AND WHEN FILED, AND ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. When
available, investors and security holders will be able to obtain
copies of these documents, including the consent
statement/prospectus, and any other documents that may be filed
with the SEC with respect to the proposed transactions free of
charge at the SEC’s website, http://www.sec.gov. Copies of
documents filed with the SEC by Andeavor Logistics will be made
available free of charge on Andeavor Logistics’ website at
http://andeavorlogistics.com/ or by contacting Andeavor Logistics’
Investor Relations Department by phone at (210) 626-7202. Copies of
documents filed with the SEC by WNRL will be made available free of
charge on WNRL’s website at http://www.wnrl.com or by contacting
WNRL’s Investor Relations Department by phone at (602) 286-1533.
Copies of documents filed with the SEC by Andeavor will be made
available free of charge on Andeavor’s website at
http://www.andeavor.com or by contacting Andeavor’s Investor
Relations Department by phone at (210) 626-4757.
Participants in the Solicitation
Relating to the Merger Andeavor Logistics, WNRL, Andeavor
and certain of their respective directors and executive officers
may be deemed to be participants in the solicitation of consent
from the unitholders of WNRL in connection with the proposed
transaction. Information about the directors and executive officers
of the general partner of Andeavor Logistics is set forth in
Andeavor Logistics’ Annual Report on Form 10-K for the year ended
December 31, 2016, which was filed with the SEC on February 21,
2017. Information about the directors and executive officers of the
general partner of WNRL is set forth in WNRL’s Annual Report on
Form 10-K for the year ended December 31, 2016, which was filed
with the SEC on March 1, 2017. Information about the executive
officers of Andeavor is set forth in Andeavor’s Annual Report on
Form 10-K for the year ended December 31, 2016, which was filed
with the SEC on February 21, 2017. Information about the directors
of Andeavor is set forth in Andeavor’s Definitive Proxy Statement
on Schedule 14A for its 2017 Annual Meeting of Stockholders, which
was filed with the SEC on March 22, 2017. These documents can be
obtained free of charge from the sources indicated above. Other
information regarding the participants in the consent solicitation
and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the consent
statement/prospectus and other relevant materials to be filed with
the SEC when they become available.
Contact:
Andeavor Investors:
Brian Randecker, Investor Relations, (210) 626-4757
Andeavor Logistics Investors:
Andrew Woodward, Sr. Director, Finance and Investor Relations, (210) 626-7202
Western Refining Logistics Investors
Michelle Clemente, Manager, Investor Relations, (602) 286-1533
Media:
Andeavor Media Relations, media@andeavor.com, (210) 626-7702
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