JP Energy Partners LP (NYSE: JPEP) units bounced up 10% in early trading Oct. 24 following the announcement of its $2 billion all-stock acquisition by American Midstream Partners (NYSE: AMID).

Denver-based American Midstream was No. 45 on Hart Energy’s The Midstream 50 ranking, based on 2015 EBITDA. JP Energy Partners was No. 48. After closing, the combined entity, to be based in Houston, expects an EBITDA of about $185 million. That would place it at No. 37 on the list.

“This is not just a transformative event, it’s an evolutionary change,” Lynn Bourdon III, American Midstream’s chairman, president and CEO, said during an Oct. 24 conference call to discuss the deal. “The increased scale of the combined partnership expands the opportunity set of initiatives we are able to competitively consider in order to achieve continued growth well into the future.”

Bourdon listed substantive extensions in the areas of terminals, crude oil, NGL and transportation.

Larger scale was also on the mind of J. Patrick Barley, president and CEO of JP Energy, who told analysts on the call that difficult market conditions had shown the value of size and geographical presence. He added that the combined company would enjoy strong positions in the Permian Basin, Eagle Ford Shale, Gulf Coast and Bakken Shale.

The deal involves a 14.5% premium based on JP Energy’s unit price at the close of trading on Oct. 21. ArcLight Capital Partners LLC, which owns 15.59% of American Midstream and 19.83% of JP Energy, according to Bloomberg, will provide up to $25 million in merger support and reimburse JP Energy’s transaction and transition costs.

The companies expect annual savings of $10 million as a result of eliminating duplication, and hope to develop a more flexible capital structure of up to $250 million to support growth. The combined company will operate more than 3,100 miles of gathering and transportation pipelines.

Joseph Markman can be reached at jmarkman@hartenergy.com or @JHMarkman.

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