Martin Midstream Partners LP (NASDAQ: MMLP) announced Aug. 11 that it will acquire all of Energy Capital Partners' (ECP) category A membership interests in Cardinal Gas Storage Partners LLC for $120 million.
Martin's indirect, wholly owned subsidiary, Redbird Gas Storage LLC, entered into an agreement with ECP and its affiliated funds to acquire the 57.8% interest in Cardinal. Redbird currently owns the remaining interest in Cardinal, and will own 100% at closing. Cardinal will retire about $265 million of net project level financings currently in place at various Cardinal subsidiaries.
The transaction is expected to be accretive to annual distributions by about 15 cents per limited partner unit by the end of 2015. Martin’s management expects to recommend a distribution increase of at least 2 cents per limited partner unit, or 8 cents annually, payable in the fourth quarter. Its distribution coverage ratio is also expected to improve to above 1.05X. Fee-based cash flows are expected to increase to 60-65% from about 50-55%.
After closing, Martin will receive 100% of cash flows from Cardinal, as there will be no indebtedness at the Cardinal level. The partnership expects to realize about $40 million to $45 million of EBITDA from the transaction for the full year 2015.
Martin, based in Kilgore, Texas, will fund the transaction using available capacity under its revolving credit facility. Martin Resource Management Corp., the controlling indirect owner of its general partner, has also committed to purchasing at least $40 million and up to $45 million of common equity units. The transaction is expected to close during the third quarter and is not subject to Hart-Scott-Rodino review.
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