Westlake Chemical Partners LP Announces Acquisition of Additional Interest in Westlake Chemical OpCo & Private Placement of C...
March 27 2019 - 6:50AM
Business Wire
Westlake Chemical Partners LP (NYSE: WLKP) (the “Partnership”)
today announced that it has agreed to acquire an additional 4.50%
limited partner interest in Westlake Chemical OpCo LP (“OpCo”) on a
fully diluted basis for approximately $201.4 million (the
“acquisition”). The purchase price for the acquisition represents
an enterprise value multiple of approximately 10.5x of OpCo’s
expected 2019 EBITDA. The Partnership intends to finance the
acquisition with borrowings under its revolving credit facility and
the proceeds of a private placement of 2,940,818 common units
representing limited partner interests of the Partnership (the
“private placement”) to certain institutional investors and an
entity (the “affiliate entity”)for the benefit of certain family
members of Messrs. Albert Chao and James Chao, each of whom serve
on the board of directors (the “Board”) of Westlake Chemical
Partners GP LLC, the general partner of the Partnership. The
private placement was priced at $21.40 per common unit and will
result in gross proceeds of approximately $62.9 million. The
Partnership believes that, with this private placement, there will
be no further need to access the equity capital markets during the
remainder of 2019. The private placement is conditioned on the
consummation of the acquisition. The acquisition, which is expected
to close on March 29, 2019 and will be effective January 1, 2019,
is expected to be immediately accretive to the Partnership’s MLP
distributable cash flow.
The acquisition will increase the Partnership’s limited partner
interest in OpCo from approximately 18.3% to approximately 22.8%
and will represent the third purchase of additional interests in
OpCo by the Partnership since the Partnership’s initial public
offering. OpCo’s assets are comprised of three ethylene production
facilities, which primarily convert ethane into ethylene and have
an aggregate annual capacity of approximately 3.7 billion pounds,
and a 200-mile ethylene pipeline. OpCo sells approximately 95% of
its ethylene production to Westlake Chemical Corporation under a
long-term supply agreement, which provides for a stable $0.10
margin per pound. OpCo intends to use the proceeds it receives in
connection with the acquisition to repay borrowings under its
intercompany debt agreements with Westlake Chemical
Corporation.
“This transaction demonstrates the sustainability of our
strategy to achieve annualized low-double-digit growth in
distributions,” said the Partnership’s President and Chief
Executive Officer, Albert Chao. “OpCo is unique in the MLP universe
given the long-term and stable nature of its key contracts and the
structure of its business. The acquisition of this additional
interest in OpCo, which provides a high-quality, stable, fee-based
earnings stream, represents just one of a number of levers we can
use to grow our distributions over time. In addition to purchasing
increased interests in OpCo, the Partnership can pursue organic
growth opportunities such as capacity expansions in OpCo’s ethylene
production facilities and acquisitions of other qualified assets
from third parties.”
The terms of the acquisition and the affiliate entity’s
participation in the private placement were approved by a Conflicts
Committee, which is composed entirely of independent directors of
the Board. This committee was advised by Evercore as to financial
matters and Akin Gump Strauss Hauer & Feld LLP as to legal
matters. Barclays Capital Inc. acted as placement agent in
connection with the private placement.
The securities offered in the private placement have not been
registered under the Securities Act of 1933, as amended (the
“Securities Act”), or any state securities laws and may not be
offered or sold in the United States absent registration or an
applicable exemption from the registration requirements of the
Securities Act and applicable state securities laws. The
Partnership has agreed to file one or more registration statements
with the Securities and Exchange Commission for the resale of the
common units sold in the private placement.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such states.
The statements in this release that are not historical facts,
but forward-looking statements, including projections of future
performance and 2019 EBITDA, the expectations regarding the closing
of the private placement and the acquisition, the impact of the
described acquisition on the Partnership’s cash available for
distribution, availability of funds and the expectation of
long-term distribution growth, could be adversely affected by,
among other things, operating difficulties; the volume of ethylene
that we are able to sell; the price at which we are able to sell
ethylene; changes in the price and availability of feedstocks;
changes in prevailing economic conditions; actions of Westlake
Chemical Corporation or other third parties; inclement or hazardous
weather conditions, including flooding, and the physical impacts of
climate change; environmental hazards; changes in laws and
regulations (or the interpretation thereof); inability to acquire
or maintain necessary permits; inability to obtain necessary
production equipment or replacement parts; technical difficulties
or failures; labor disputes; difficulty collecting receivables;
inability of our customers to take delivery; fires, explosions or
other industrial accidents; our ability to borrow funds and access
capital markets; and other risk factors. For more detailed
information about the factors that could cause actual results to
differ materially for the projections contained herein, please
refer to the Partnership’s Annual Report on Form 10-K for the year
ended December 31, 2018.
Use of Non-GAAP Financial Measures
This release makes reference to a forward-looking “non-GAAP”
financial measure, 2019 EBITDA. The Partnership reports its
financial results in accordance with U.S. generally accepted
accounting principles ("GAAP") but believes that certain non-GAAP
financial measures, such as EBITDA, provide useful supplemental
information to investors regarding the underlying business trends
and performance of its ongoing operations and are useful for
period-over-period comparisons of such operations. EBITDA is
defined as net income before interest expense, income taxes,
depreciation and amortization. This non-GAAP financial measure
should be considered as a supplement to, and not as a substitute
for, or superior to, the financial measures prepared in accordance
with GAAP. Because EBITDA may be defined differently by other
companies in the Partnership’s industry, this definition may not be
comparable to similarly titled measures of other companies. See
below a reconciliation of EBITDA to net income. A forward-looking
estimate of net cash provided by operating activities is not
provided because the items necessary to estimate net cash provided
by operating activities, in particular the change in operating
assets and liabilities, are not accessible or estimable at this
time. The Partnership does not anticipate the changes in operating
assets and liabilities to be material, but changes in accounts
receivable, accounts payable, accrued liabilities and deferred
revenue could be significant, such that the amount of net cash
provided by operating activities would vary substantially from the
amount of projected EBITDA.
2019 Estimates Net income $322 million to $337
million Add: Depreciation and amortization $109 million Interest
expense $13 million Provision for income taxes $1 million EBIDTA
$445 million to $460 million
Westlake Chemical Partners LP
Westlake Chemical Partners is a limited partnership formed by
Westlake Chemical Corporation to operate, acquire and develop
ethylene production facilities and other qualified assets.
Headquartered in Houston, Texas, the Partnership, following the
closing of the acquisition described above, is expected to own an
approximately 22.8% limited partner interest in Westlake Chemical
OpCo LP. Westlake Chemical OpCo LP's assets consist of three
ethylene production facilities in Calvert City, Kentucky, and Lake
Charles, Louisiana and an ethylene pipeline.
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