Phase 2 of Enterprise Products’ acquisition of Oiltanking Partners

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A unit-for-unit transaction

On October 1, Enterprise Products Partners (EPD) also proposed to merge Oiltanking Partners into EPD in a unit-for-unit exchange transaction.Phase 2

In this transaction, each unit of OILT will be exchanged for 1.23 units of EPD, representing at-market value for OILT and EPD as of September 30.

So, in Phase 2, EPD will get the rest of the 34% ownership of OILT for $1.4 billion. In other words, EPD will complete OILT’s 100% acquisition for a total consideration of ~$6.0 billion.

Phase II is subject to the approval of EPD’s directors. EPD has sent the proposal to the conflict committee of OILT’s general partner.

A brief history of Enterprise Products and Oiltanking’s relationship

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EPD and OILT have hd a close business association for the past two decades. Both these companies operate in the midstream energy service business, with EPD focusing on onshore and offshore pipeline transportation of oil, natural gas, and NGLs and NGL fractionation. OILT primarily focuses on storage and marine terminaling of oil, refined products, and LPG.

Other energy companies engaged in energy transportation and storage activities include Spectra Energy (SE), Energy Transfer Partners (ETP), and Williams Companies (WMB). Some of these are components of the Energy Select Sector SPDR ETF (XLE).

Common business interests

In 1983, OTI (OILT’s predecessor) and EPCO (EPD’s predecessor) executed an LPG import terminal services agreement. Following this deal, ECO completed the terminal construction. In 1994, EPCO and OTI entered an agreement for methanol tankage construction.

In 1999, EPD and Idemitsu formed a joint venture to complete a fully refrigerated LPG export facility at OTI. In 2003, EPD acquired Idemitsu’s share in the joint venture. By 2006, EPD and OTI executed a new 20-year LPG import and export terminal services agreement.

In 2013, OILT connected to EPD’s ECHO facility. EPD’s ECHO crude oil storage facility is located near the Gulf Coast in Texas. ECHO (Enterprise Crude Houston Terminal) connects marine facilities that provide access to any refinery in the U.S. Gulf Coast.

In 2014, EPD and OILT announced a 50-year LPG terminal services agreement.

Together, OILT and EPD have common platforms in Beaumont. EPD can also leverage OILT’s LPG export facilities and terminaling service. Read on to the next parts of this series to learn why OILT’s merger can boost EPD’s performance. Read our overview of EPD here to learn more about its assets and projects.

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