Valero Energy Partners LP (VLP) announced that it will acquire the McKee Terminal Services Business from a subsidiary of Valero Energy Corp. (VLO) for total consideration of $240 million.

The acquisition was approved by VLP’s board of directors and is expected to close April 1.

The company will acquire a terminal business that supports Valero’s McKee refinery that consist of 75 tanks with 4.4 million barrels (MMbbl) of storage capacity for crude oil, intermediates and refined petroleum products, according to the company.

VLP also has plans to enter into a 10-year terminaling agreement with a subsidiary of Valero upon closing of the deal. The transaction is expected to contribute about $28 million of EBITDA in its first 12 months of operation, the company stated.

“We’re pleased to announce this next step in our growth strategy, which is complementary to the existing McKee Logistics System,” Joe Gorder, CEO of general partner, was quoted as saying.

“We remain well-positioned to deliver our targeted year-over-year distribution growth of 25% for 2016 and 2017,” Gorder stated.

VLP said it expects to finance the acquisition with $139 million of borrowings under its revolving credit facility, $65 million of cash and the issuance of additional common units and general partner units to Valero subsidiaries, valued collectively at about $36 million.

“We believe this is a slight positive for VLO as the transaction was mostly cash and the multiple was decent. We like VLO for its dominant refining footprint on the Gulf Coast, where the company should benefit from an increasing oversupply of medium and heavy crudes,” RBC Capital Markets LLC analyst Brad Heffern said in a note to clients.

“We also think that VLO is building a track record of increased capital discipline and shareholder cash returns, which could cause the stock to re-rate," he noted.

Last year, the company acquired the Corpus Christi Terminal Services Business from a subsidiary of VLO for $465 million. Under the deal, the company purchased two terminals that support Valero's Corpus Christi East and West refineries. The assets consist of 134 tanks with 10.1 MMbbl of storage capacity for crude oil, intermediates and refined petroleum products.

Headquartered in San Antonio, VLP is a fee-based MLP formed by VLO to own, operate, develop and acquire crude oil and refined products pipelines, terminals and other transportation and logistics assets. The company assets include crude oil and refined petroleum products pipeline and terminal systems in the Gulf Coast and Mid-Continent regions of the U.S. that are integral to the operations of nine of Valero’s refineries.

Brandy Jules can be reached at bjules@hartenergy.com.

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