- Kayne Anderson Energy Development Company (KED) to merge with
and into Kayne Anderson MLP Investment Company (KYN) in a
non-taxable transaction (the “Merger”)
- Exchange ratio to be based on relative net asset value (“NAV”)
per share immediately prior to closing. Based on NAVs as of
February 14th, KED stockholders would have received approximately
0.96 shares of KYN for each share of KED
- Kayne Anderson MLP Investment Company will change its name to
Kayne Anderson MLP/Midstream Investment Company to reflect
increased opportunities to invest in midstream energy
corporations
- KYN intends to pay a distribution at its current annualized
rate of $1.80 per share over the next 12 months. Once the Merger
closes, KYN will convert from a quarterly to a monthly distribution
schedule
- KYN expects to realize approximately $1.5 million of cost
savings annually as a result of the Merger
- Kayne Anderson will establish new management fee waivers for
KYN, providing substantial savings to stockholders as KYN’s
investments appreciate
KA Fund Advisors, LLC (“Kayne Anderson”), which serves as the
adviser to Kayne Anderson MLP Investment Company (NYSE:KYN) and
Kayne Anderson Energy Development Company (NYSE: KED), announced
today that the Board of Directors of KYN and the Board of Directors
of KED approved a proposal to merge the two companies. Subject to
KED stockholder approval, KED common stockholders will be issued
KYN common stock, and KYN will acquire substantially all the assets
and liabilities of KED.
The exchange ratio will be based on the relative NAVs per share
of each company immediately prior to the closing of the Merger. As
of February 14, 2018, KYN’s NAV per share was $19.06, and KED’s was
$18.26. For illustrative purposes, if these were the NAVs on the
day prior to closing of the Merger, then KED stockholders would be
issued approximately 0.96 shares of KYN for each share of KED. It
is currently expected that the Merger will be completed in the
fiscal quarter ending in August 2018, subject to obtaining KED
stockholder approval, compliance with all regulatory requirements
and satisfaction of customary closing conditions. The Merger
is expected to qualify as a tax-free reorganization for federal
income tax purposes, and as a result, the Merger is not expected to
be taxable to stockholders of either KYN or KED.
The Board of Directors of KYN and KED determined that the
proposed Merger is in the best interests of each company and its
stockholders. The companies have similar investment strategies and
portfolios focusing on energy-related MLPs and other Midstream
Energy Companies. The combined company will pursue an investment
objective of obtaining a high after-tax total return by investing
at least 85% of total assets in energy-related MLPs and their
affiliates and other Midstream Energy Companies.
KYN also announced that it is changing its name to Kayne
Anderson MLP/Midstream Investment Company. Kayne Anderson believes
this change is consistent with recent trends in the midstream
sector, with an increasing amount of midstream assets being held by
Midstream Energy Companies that are not structured as MLPs
(“Midstream C-Corps”). “We want to increase KYN’s flexibility to
invest in securities issued by all types of Midstream Energy
Companies,” said Kevin McCarthy, KYN’s Chairman and CEO. “Without
this change, KYN would be required to hold at least 80% of its
portfolio in MLPs and would not be able to hold more than 20% of
its investments in Midstream C-Corps. While we expect the majority
of KYN’s portfolio will continue to be equity securities issued by
MLPs, we also see very attractive investment opportunities in
Midstream C-Corps,” said Mr. McCarthy.
KYN also announced today that it intends to pay a distribution
at its current annualized rate of $1.80 per share over the next 12
months. KYN will continue to pay distributions on a quarterly basis
until the Merger closes and intends to begin paying distributions
on a monthly basis shortly thereafter (expected to commence in
September 2018). Payment of future distributions is subject to
approval by KYN’s Board of Directors.
“We are excited about the proposed Merger and believe it
positions the company to take advantage of the favorable outlook
for the midstream sector,” said Mr. McCarthy. “As part of the
proposed transaction, we think it is important to give investors
increased visibility on the distribution that we expect to pay over
the next 12 months. We believe a key piece of the value
proposition for KYN’s investors is its distribution, and we believe
that more frequent, monthly distributions will benefit many
stockholders,” explained Mr. McCarthy. “Going forward, the
Board of Directors expects to determine KYN’s distribution based on
long-term, sustainable net distributable income, with a bias toward
maintaining the current distribution. To the extent that portfolio
changes, simplifications or other M&A transactions lower our
NDI and make the current distribution unsustainable, we will reset
our distribution accordingly,” continued Mr. McCarthy.
As part of the Merger, Kayne Anderson has agreed to revise its
management fee waiver agreement with KYN, significantly lowering
the dollar thresholds for such fee waivers. The table below
outlines the current and proposed management fee waivers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of |
|
|
|
Incremental |
|
KYN Assets |
|
Proposed |
|
Management |
|
Management |
|
|
Current Fee Waiver |
|
Proposed Fee Waiver |
|
Waiver |
|
Fee Waiver |
|
Fee |
|
|
$0 to
$4.5 billion |
|
$0 to
$4.0 billion |
|
|
|
0.000% |
|
1.375% |
|
|
$4.5
billion to $9.5 billion |
|
$4.0
billion to $6.0 billion |
|
$0.5 billion lower |
|
0.125% |
|
1.250% |
|
|
$9.5
billion to $14.5 billion |
|
$6.0
billion to $8.0 billion |
|
$3.5 billion lower |
|
0.250% |
|
1.125% |
|
|
Greater than $14.5 billion |
|
Greater than $8.0 billion |
|
$6.5
billion lower |
|
0.375% |
|
1.000% |
|
|
|
|
|
|
|
|
|
|
|
“We believe the new management fee waivers provide a substantial
benefit to KYN’s stockholders,” said Mr. McCarthy, "as the pro
forma assets as of February 14th are $3.9 billion, which is just
below the first threshold. We are bullish on the return prospects
for the company’s portfolio, and the management fee as a percent of
total assets will decline as the company’s assets appreciate,”
continued Mr. McCarthy.
The Merger is expected to result in several benefits for KYN and
KED stockholders, including:
- Anticipated accretion to KYN’s NDI;
- Increased pro forma distribution for KED’s stockholders;
- Expected cost savings through the reduction of duplicative
fixed expenses and a reduction in variable expenses – including
management fee waivers agreed to by Kayne Anderson;
- Potential for larger asset base to provide greater financial
flexibility; and
- The opportunity for enhanced long-term market liquidity
A “Frequently Asked Questions” document regarding the Merger can
be found at www.kaynefunds.com. More information on the Merger will
be contained in the joint proxy statement/prospectus expected to be
filed in the coming weeks with the Securities and Exchange
Commission (SEC). KED expects to mail a definitive joint proxy
statement/prospectus to its stockholders that will contain
information about the Merger following a review period with the
SEC.
Kayne Anderson MLP Investment Company is a non-diversified,
closed-end management investment company registered under the
Investment Company Act of 1940, whose common stock is traded on the
NYSE. KYN’s investment objective is to obtain a high after-tax
total return by investing at least 85% of its total assets in
energy-related partnerships and their affiliates (collectively,
“MLPs”), and in other companies that, as their principal business,
operate assets used in the gathering, transporting, processing,
storing, refining, distributing, mining or marketing of natural
gas, natural gas liquids (including propane), crude oil, refined
petroleum products or coal.
Kayne Anderson Energy Development Company is a non-diversified,
closed-end investment company registered under the Investment
Company Act of 1940. KED’s investment objective is to generate both
current income and capital appreciation primarily through equity
and debt investments. KED will seek to achieve this objective by
investing at least 80% of its net assets together with the proceeds
of any borrowings (its "total assets") in securities of companies
that derive the majority of their revenue from activities in the
energy industry, including: (a) Midstream Energy Companies, which
are businesses that operate assets used to gather, transport,
process, treat, terminal and store natural gas, natural gas
liquids, propane, crude oil or refined petroleum products; (b)
Upstream Energy Companies, which are businesses engaged in the
exploration, extraction and production of natural resources,
including natural gas, natural gas liquids and crude oil, from
onshore and offshore geological reservoirs; and (c) Other Energy
Companies, which are businesses engaged in owning, leasing,
managing, producing, processing and sale of coal and coal reserves;
the marine transportation of crude oil, refined petroleum products,
liquefied natural gas, as well as other energy-related natural
resources using tank vessels and bulk carriers; and refining,
marketing and distributing refined energy products, such as motor
gasoline and propane to retail customers and industrial
end-users.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This press release contains "forward-looking statements" as
defined under the U.S. federal securities laws. Generally, the
words "believe," "expect," "intend," "estimate," "anticipate,"
"project," "will" and similar expressions identify forward-looking
statements, which generally are not historical in nature.
Forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ from the
either company’s historical experience and its present expectations
or projections indicated in any forward-looking statements. These
risks include, but are not limited to, changes in economic and
political conditions; regulatory and legal changes; MLP industry
risk; leverage risk; valuation risk; interest rate risk; tax risk;
and other risks discussed in each company’s filings with the SEC.
You should not place undue reliance on forward-looking statements,
which speak only as of the date they are made. The companies
undertake no obligation to publicly update or revise any
forward-looking statements made herein. There is no assurance that
either company’s investment objectives will be attained.
Contact:
KA Fund Advisors, LLC877-657-3863http://www.kaynefunds.com/
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