Crestwood Midstream (CMLP) Acquires Remaining Interest in CMM for $258M

January 8, 2013 11:58 AM EST Send to a Friend
Crestwood Midstream Partners (NYSE: CMLP) has purchased the remaining 65% interest in Crestwood Marcellus Midstream LLC ("CMM") from Crestwood Holdings Partners LLC ("Crestwood Holdings") for $258 million. The transaction is expected to be 7-8% accretive to Crestwood's 2013 distributable cash flow on a fully diluted basis and was funded with $129 million of cash drawn on Crestwood's existing revolving credit facility and approximately 6.2 million new Crestwood Class D units ("Class D Units") issued to Crestwood Holdings. As a part of the consideration received for the transaction, Crestwood Holdings is maintaining its 2% general partner interest in Crestwood. Crestwood does not expect any additional capital markets activity related to this transaction.

Prior to the transaction, Crestwood Holdings, which is controlled by First Reserve Corporation, owned 100% of Crestwood's general partner ("Crestwood GP") and approximately 42% of Crestwood's outstanding limited partner units. After the transaction, Crestwood Holdings owns approximately 47% of Crestwood's outstanding limited partner units taking into account the new Class D Units. The Class D Units, substantially similar to Crestwood's existing Class C Units, allow for the payment of quarterly distributions in cash or through the issuance of additional Class D Units at the discretion of Crestwood. The Class D Units will begin receiving distributions with the first quarter 2013 distribution, payable in the second quarter 2013, and will maintain the pay-in-kind feature until they convert to common units on a one-for-one basis on March 1, 2014. Crestwood Holdings plans to use the cash portion of the purchase price to reduce debt, which will provide Crestwood Holdings incremental flexibility to continue its support of future Crestwood growth through incremental capital investment.

The $258 million purchase price reflects an enterprise value of $525 million for 100% of CMM, including net CMM debt of approximately $130 million, and implies a transaction value of approximately 8.9 times estimated CMM 2013 earnings before interest, taxes, depreciation and amortization ("EBITDA"), which is consistent with comparable transactions in the midstream sector. The transaction was unanimously approved by the Crestwood GP Conflicts Committee, comprised entirely of independent directors, which retained Robert W. Baird & Co. Incorporated as its independent financial advisor to assist in evaluating the transaction and to render a fairness opinion. Additionally, the Conflicts Committee engaged the law firm of Akin Gump Strauss Hauer & Feld LLP to serve as its legal counsel.


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