Dominion Midstream Partners (DM) to Acquire Questar Pipeline in ~$1.73B Deal
- Donald Trump Sworn in as 45th U.S. President
- Wall Street ends higher as Trump becomes president
- Walgreens Boots Alliance (WBA) Said to Face Antitrust Concern for Rite Aid (RAD) Fix - Bloomberg
- Bristol-Myers Squibb (BMY) Says It Won't Pursue Accelerated U.S. Regulatory Pathway for Opdivo Plus Yervoy in Lung Cancer
- Apple (AAPL) Sues Qualcomm (QCOM) Over Patent Royalties in Antitrust Case - Bloomberg
News and research before you hear about it on CNBC and others. Claim your 2-week free trial to StreetInsider Premium here.
Dominion Midstream Partners, LP (NYSE: DM) and Dominion Resources, Inc. (NYSE: D) announced an agreement in which Dominion Midstream will acquire Questar Pipeline, LLC, from Dominion for consideration of approximately $1.725 billion, including indebtedness of Questar Pipeline as part of the transaction value. The acquisition has an anticipated effective date of Dec. 1, 2016. The board of directors of Dominion and the board of directors and Conflicts Committee of Dominion Midstream GP, LLC, the general partner of Dominion Midstream, have approved the transaction.
Dominion Midstream intends to finance the acquisition through the following transactions:
- Dominion Midstream's assumption of Questar Pipeline's $435 million of outstanding indebtedness;
- Equity offerings, including:
- An underwritten public offering of Dominion Midstream common units representing limited partner interests in the partnership,
- Commitments received from a group of institutional investors led by Stonepeak Infrastructure Partners for $137.5 million of common limited partner units and up to $600 million of convertible preferred units representing limited partner interests in the partnership that are to be issued privately, and
- Common units and preferred units that are to be issued to Dominion; and
- A $300 million term loan provided by a group of banks, allowing Dominion Midstream to repay an existing term loan currently provided by Dominion.
Upon closing, the acquisition of Questar Pipeline – which owns and operates Federal Energy Regulatory Commission-regulated natural gas transmission and storage assets in Colorado, Utah and Wyoming – will be immediately accretive to Dominion Midstream's distributable cash flow and supportive of the partnership's intention to grow distributions to unitholders at a compounded annual growth rate of 22 percent per year. It is also expected to more than double Dominion Midstream's existing adjusted EBITDA, thereby obviating the partnership's need to acquire any additional assets or issue any additional equity to meet its annual distribution growth targets until the second half of 2018.
Subject to certain conditions, the preferred units will pay a distribution of 4.75 percent per year for two years, and thereafter a distribution equal to the greater of 4.75 percent per year and the amount that the preferred units would have received if they had converted into common limited partner units. The preferred units will generally be convertible into common limited partner units at a price reflecting an approximate 15 percent premium to the pricing of this morning's underwritten public offering of common limited partner units on a one-for-one basis after two years, at the purchasers' option, and after three years at Dominion Midstream's option, subject to certain conditions.
Dominion plans to use proceeds from the Questar Pipeline dropdown into Dominion Midstream to retire outstanding debt.
Thomas F. Farrell II, chairman, president and chief executive officer of Dominion and chairman and CEO of Dominion Midstream, said:
"Dominion Midstream's planned acquisition of Questar Pipeline and related financing have been anticipated as part of the financing structure of the Dominion-Questar Corporation combination since it was announced in February 2016. The capital generated from the Questar Pipeline dropdown will allow Dominion to pay down debt while supporting its earnings and dividend growth targets. The dropdown will also provide Dominion Midstream with additional earnings to support its best-in-class growth rate, without another asset drop or additional equity, until the second half of 2018.
"This successful financing also validates our business plan for Dominion Midstream, which involves accessing the capital markets to fund the acquisition of midstream assets to support the partnership's stated intention to grow distributions by 22 percent per year."
The Dominion Midstream GP's Conflicts Committee was advised by Richards, Layton & Finger, P.A. and Evercore Group L.L.C. This transaction is not subject to additional regulatory or other approvals.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Tucows (TCX) to Acquire eNom from Rightside (NAME) for $83.5M
- AIG (AIG) Enters Reinsurance Agreement with Berkshire Hathaway (BRK-A) Unit
- Herbalife (HLF) Provides Q4, FY17 Guidance in Memorandum for $1.325B Credit Facility; Lowers FY17 Sales Guidance
Create E-mail Alert Related CategoriesCorporate News, Guidance, Hot Corp. News, Hot M&A, Management Comments, Mergers and Acquisitions, Spinoffs
Related EntitiesDividend, Earnings, Definitive Agreement
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!