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Arc Logistics Partners (ARCX) to Acquire JBBR in $216M Deal

February 20, 2015 8:13 AM EST
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Arc Logistics Partners (NYSE: ARCX), through a joint venture arrangement with GE Energy Financial Services, a unit of General Electric Company (NYSE: GE), has agreed to acquire all of the membership interests of Joliet Bulk, Barge & Rail LLC ("JBBR") from CenterPoint Properties Trust for $216 million. JBBR's principal assets consist of a crude oil unloading terminal and a 4-mile crude oil pipeline, the Joliet Terminal, which are in the final stages of construction in Joliet, Illinois and are expected to be complete in mid to late April 2015. The acquisition consideration also includes an earn-out payable by the JBBR joint venture to CenterPoint based upon petroleum product throughput volumes at the Joliet Terminal (including minimum volumes paid under customer contracts irrespective of physical deliveries of product thereunder). JBBR joint venture's earn-out obligations to CenterPoint will terminate upon the payment, in the aggregate, of $27 million.

At the closing of the acquisition, Arc Logistics will manage ongoing operations of the Joliet Terminal and own a 60% interest in the JBBR joint venture company. GE Energy Financial Services will own the remaining 40%. The Joliet Terminal is expected to begin commercial operations by mid to late April 2015, and the acquisition will not close until the Joliet Terminal becomes commercially operable.

Arc Logistics will finance its approximate $130 million portion of the purchase price with net proceeds from the sale of common units in a private placement and from borrowings under its revolving credit facility. Institutional investors have committed to acquire, concurrently with the closing of the acquisition, approximately 4.4 million of Arc Logistics' common units in a private placement at a price of $17.00 per unit, resulting in gross proceeds (before fees and expenses) to the Partnership of $75 million.

Once complete, the Joliet Terminal will have the capability to unload approximately 85,000 barrels of crude oil per day, and will have approximately 300,000 barrels of storage and a 4-mile pipeline connection to a common carrier crude oil pipeline. The facility will have rail and marine access and capabilities as well as more than 80 acres of land available for future expansion. At closing, the Joliet Terminal will be supported by a terminal services agreement as well as a throughput and deficiency agreement with a major oil company, each with a term of three years based on minimum throughput volume commitments. The estimated annual EBITDA of JBBR is expected to be between $23 and $25 million, of which the Partnership will receive 60% based upon its percentage ownership interest in the JBBR joint venture company.

Based upon JBBR's estimated annual EBITDA, the transaction is expected to be immediately accretive to the Partnership's distributable cash flow per unit. In connection with the acquisition of JBBR, the Partnership's management intends to recommend to the Board of Directors of the Partnership's general partner an increase in the Partnership's quarterly distribution by $0.03 per limited partner unit (which represents an approximate 7% increase from the current quarterly distribution) following the first full quarter of operations of the Joliet Terminal.

The JBBR acquisition continues the Partnership's existing business strategy to expand its market position and support the expansion plans of new and existing customers, while generating stable cash flows for its unit holders from quality assets supported by long-term contracts.



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