Westlake Chemical Partners LP announced on Wednesday that it has agreed to acquire an additional 4.50% limited partner interest in Westlake Chemical OpCo LP on a fully diluted basis for approximately $201.4 million.
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.
Source: Westlake
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