Notable Mergers and Acquisitions 11/17: (SO) (TSO)/(WNR) (WCG)/(UAM) (FCX)
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"Our recent acquisition of the Boulder Solar I Facility underscores Southern Power's growing success in acquiring and developing utility-scale solar across the United States," said Southern Power President and CEO Buzz Miller. "This project aligns with our business model as we strategically develop our renewable portfolio."
The Boulder Solar I Facility is located in Clark County, approximately 20 miles southeast of Las Vegas. Southern Power co-owns two additional solar facilities in Nevada, the 20-MW Apex Solar Facility and the 30-MW Spectrum Solar Facility.
"With over 30 years' experience and more than 2.6 gigawatts of innovative solar power plants operating around the world, SunPower is a global leader driving the adoption of reliable, cost-effective solar power at utility scale," said Ty Daul, SunPower Senior Vice President, Americas Power Plants. "We are proud to partner with Southern Power to deliver long-term value to Nevada customers through the Boulder Solar I Facility."
Construction of Boulder Solar I began in January 2016 and the facility is expected to begin commercial operation in December 2016. SunPower developed, designed and constructed the plant, and will operate and maintain it upon completion. NV Energy will purchase the electricity and associated portfolio energy credits generated by the facility under a 20-year power purchase agreement. Boulder Solar I operates using SunPower® Oasis® Power Plant technology, a fully integrated, modular solar power block that is engineered to rapidly and cost-effectively deploy large solar projects that maximize power generation while optimizing land use.
With the addition of the Boulder Solar I Facility, Southern Power owns more than 2,700 MW of renewable generation from 33 solar, wind and biomass facilities either announced, acquired or under construction. In total, the Southern Company system has added or announced more than 4,000 MW of renewable generation since 2012.
The Boulder Solar I project fits Southern Power's business strategy of growing its wholesale business through the acquisition and construction of generating assets substantially covered by long-term contracts.
*** Tesoro Corporation (NYSE: TSO) and Western Refining, Inc. (NYSE: WNR) jointly announced a definitive agreement under which Tesoro will acquire Western at an implied current price of $37.30 per Western share in a stock transaction, representing an equity value of $4.1 billion based on Tesoro's closing stock price of $85.74 on November 16, 2016. This represents an enterprise value of $6.4 billion, including the assumption of approximately $1.7 billion of Western's net debt and the $605 million market value of non-controlling interest in Western Refining Logistics, LP (NYSE: WNRL). This transaction has been unanimously approved by the boards of directors of both companies, and is another transformative step forward for Tesoro and the Company's ongoing commitment to creating significant value for shareholders, employees, communities and other key partners. The acquisition creates a premier, highly integrated and geographically diversified refining, marketing and logistics company and provides a strong platform for earnings growth and cash flow generation.
- Top Tier Refining System: Adds Western's refineries in Texas, New Mexico and Minnesota to Tesoro's existing refineries in California, Washington, Alaska, Utah and North Dakota, which will expand the combined company's operational capabilities and improve access to advantaged crude oil and extended product regions. Combined, the Company will have ten refineries, a refining capacity of over 1.1 million barrels per day and will benefit from Tesoro's and Western's proven track record of operational excellence.
- Strong, Combined Multi-brand Marketing and Convenience Store Portfolio in Growing Geographies: Brings together 12 premium and leading value retail and convenience store brands to better serve a broad customer base and regional preferences, and provides improved ratable supply from the entire refining system. The combined retail operations will comprise over 3,000 branded retail stations operating under a variety of brands including ARCO®, Shell®, Exxon®, Mobil®, SuperAmerica®, Giant and Tesoro®.
- Expands Opportunities for Logistics Growth: Leverages an extensive and complementary logistics network with access to advantaged crude oil basins. The logistics business will include ownership in two high-growth, independent Master Limited Partnerships - Tesoro Logistics LP and Western Refining Logistics, LP. Upon close of the transaction, Tesoro will own the general partner and be the largest unitholder in each MLP. Tesoro is committed to growing the value of the combined logistics portfolio and the current logistics growth strategy will be deployed across the expanded business. This strategy consists of: generating stable fee-based revenues; optimizing existing assets; pursuing high-return organic growth opportunities; growing through strategic acquisitions; and growing through the combined drop down inventory available to the two MLPs. Additionally, Tesoro expects to use the parent company's strong operating and execution capability to enhance the portfolio of opportunities in the high-growth Permian and other attractive crude oil basins. This will include investments in crude oil gathering and storage, as well as natural gas gathering and processing.
- Significant Shareholder Value Creation from Synergies: Shareholders of both companies will benefit from $350 to $425 million in operational, commercial and corporate synergies. The Company expects to achieve the full run rate of these synergies within the first two years. The Company is confident in its ability to achieve these synergies given its solid track record of integrating operations and leveraging its integrated business model to deliver earnings growth through productivity, cost and system optimization benefits.
- Strong Financial Position and Significant Cash Flow Enable Investments for Future Growth, Reducing Debt and Returning Cash to Shareholders: The combined company is expected to deliver strong cash flows providing growth in shareholder value through investments in high-return capital projects, dividends and share repurchases. Upon closing, Tesoro will continue to have a strong balance sheet and credit metrics, and will remain on track for achieving an investment grade credit rating. The Company has increased its share repurchase authorization by $1.0 billion to over $2.0 billion in total. Tesoro expects to maintain its current quarterly dividend of $0.55 per share (or $2.20 per share annualized) after closing and is focused on growing dividends commensurate with the growth of the Company.
*** WellCare Health Plans, Inc. (NYSE: WCG) and Universal American Corp. (NYSE: UAM) announced today that they have entered into a definitive agreement under which WellCare will acquire Universal American in an all cash transaction valued at $10.00 per share of common stock. This represents a 34 percent premium to Universal American's 60-day volume-weighted average closing stock price as of November 16, 2016.
WellCare expects to retire Universal American's outstanding preferred shares shortly after closing and, in connection with the merger, Universal American's outstanding convertible notes will become convertible and holders will have the right to require their convertible notes to be repurchased. The proposed price for Universal American's common shares implies an equity value of approximately $600 million. With the retirement of Universal American's preferred shares and its convertible debt, the transaction would be valued at approximately $800 million. The transaction was approved by the board of directors of WellCare and Universal American. The transaction is expected to be funded through available cash on hand and is expected to close in the second quarter of 2017.
"We are pleased to announce this agreement with Universal American. Their focus on Medicare Advantage makes this transaction a very good strategic fit for WellCare," said Ken Burdick, WellCare's CEO. "With approximately 114,000 Medicare Advantage members, and nearly 70 percent enrolled in a 4.0 or higher Star Rating plan, the transaction strengthens WellCare's Medicare Advantage business in two key local markets - New York and Texas - and gives us a Medicare Advantage presence in Maine. In addition, we intend to leverage their core competency in physician engagement to strategically develop and grow value-based provider relationships."
"Everyone associated with Universal American has worked tirelessly to bring vibrancy to the Healthy Collaboration® model in which we work closely with our physician partners to improve quality and lower costs for Medicare beneficiaries," said Richard A. Barasch, Universal American's Chairman and CEO. "Through this acquisition, WellCare is demonstrating its commitment to this model."
The acquisition is expected to add approximately 65,000 Medicare Advantage (MA) members in a 4.5-Star plan in Houston-Beaumont, Texas and approximately 14,000 MA members in a 4.0-Star plan in the Northeast, primarily in New York, to WellCare's Medicare Health Plans membership. In addition, Universal American partners with Accountable Care Organizations (ACO) in 11 states, six of which are WellCare Medicare Advantage markets.
Under the terms of the agreement, Universal American stockholders will receive $10.00 in cash for each share of Universal American common stock. WellCare expects annual synergies of approximately $25 million to $30 million by 2019. The transaction is currently expected to produce $0.60 to $0.70 of accretion to WellCare's adjusted earnings per share in the first year after closing and $0.70 to $0.80 of accretion in the second year after closing, excluding one-time transaction costs and integration costs. The transaction is subject to approval by Universal American's stockholders and other customary closing conditions, including regulatory approvals.
BofA Merrill Lynch is acting as financial advisor to WellCare. Kirkland & Ellis LLP and Bass, Berry & Sims PLC are acting as legal advisers to WellCare. MTS Health Partners, LP is acting as financial advisor to Universal American. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Universal American.
WellCare's presentation describing the highlights of the transaction can be accessed via the following link: http://ir.wellcare.com/presentations.
*** Freeport-McMoRan Inc. (NYSE: FCX) announced that it has completed the indirect sale of its 70 percent interest in TF Holdings Limited (“TFHL”) to China Molybdenum Co., Ltd. for $2.65 billion in cash. TFHL is a Bermuda holding company that indirectly owns an 80 percent interest in Tenke Fungurume Mining S.A. (Tenke) located in the Democratic Republic of Congo. FCX had a 70 percent interest in TFHL and an effective 56 percent interest in Tenke.
FCX plans to use net proceeds from the transaction of approximately $2.65 billion to repay indebtedness, half of which will be used to repay borrowings under FCX's unsecured bank term loan.
Under the terms of the agreement, FCX could also receive contingent consideration of up to $120 million in cash, consisting of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both during calendar years 2018 and 2019.
FCX is a premier U.S.-based natural resources company with an industry-leading global portfolio of mineral assets. FCX is the world's largest publicly traded copper producer.
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