The advantage of strategic acquisitions over organic expansion is that they are immediately accretive and complement existing assets. The assets are also generally tied to long-term customer contracts.
MLPs have also started focusing more on bolt-on acquisitions over organic projects due to project delays. MLPs face project delays due to various required regulatory, environmental, and federal approvals. In some cases, the project proposal might be rejected.
Below are a few strategic acquisition deals in 2016:
- Buckeye Partners’ (BPL) acquisition of Vtti B.V.: Buckeye Partners announced the acquisition of a 50.0% stake in Vtti B.V. for ~$1.2 billion. According to Clark C. Smith, BPL’s CEO (chief executive officer), “This investment in VTTI provides immediate access to a stable portfolio of international terminalling and storage assets, as well as an established platform to participate in further attractive growth opportunities across the globe.”
- Energy Transfer Partners (ETP) and Sunoco Logistics Partners (SXL) are both facing delays in the DAPL (Dakota Access Pipeline) project. They recently announced strategic acquisitions. ETP announced the acquisition of “certain interests” in PennTex Midstream Partners (PTXP) for $640.0 million in a 50-50 cash-stock deal.
- SXL has announced the acquisition of Vitol’s integrated crude oil business in the Midland Basin. Read SXL Expands Permian Footprint through This Acquisition for more details.
- Sunoco (SUN) completed the acquisition of Emerge Energy Services’ (EMES) Wholesale Fuel Distribution and Terminalling Business for $167.7 million.
In the next part, we’ll look at the current valuations of MLPs and the impact on MLP M&A (merger and acquisition) activity.