SemGroup Corp. (NYSE: SEMG) has acquired Houston Fuel Oil Terminal Co., one of the largest oil terminals in the U.S., from investment funds managed by Alinda Capital Partners in a transaction expected to ultimately total about $2.1 billion. The deal establishes SemGroup on the Houston Ship Channel, one of the country’s premier energy markets.

The 330-acre, 16.8-million-barrel terminal on the U.S. Gulf Coast has pipeline connectivity to the local refining complex, deepwater marine access and inbound pipeline, rail and truck receipt capabilities from all major producing basins.

The business is fully supported by take-or-pay contracts with primarily investment-grade counterparties that have been customers for an average of 15 years. The terminal is currently executing on contractually supported growth projects, including a new ship dock, a new pipeline and connections, as well as an additional 1.45 million barrels of crude oil storage, expected to be in service mid-2018.

“This is a transformational acquisition that adds tremendous stability to our business and provides a dynamic platform for growth,” said SemGroup President and CEO Carlin Conner in a statement. “Consistent with our strategy to diversify our portfolio and become more refinery facing, HFOTCO brings a well-established base of high-quality, long-tenured customers. At the same time, the terminal’s premier location on the Houston Ship Channel provides deepwater access and is well positioned to capture increasing export volumes. With the addition of HFOTCO, SemGroup will be uniquely positioned to capture the future trends in exporting crude oil and refined products resulting from the near and long-term anticipated growth in U.S. shale production.”

The total purchase consideration will consist of two payments. The first payment will be $1.5 billion at closing, including the assumption of an estimated $785 million of existing debt, and issuance of between $300 million to $400 million in common shares, at SemGroup’s election, to Alinda at $32.30 per share. The remainder of the initial payment will be funded in cash from SemGroup’s revolving credit facility.

The second payment will consist of an additional $600 million which will be paid in cash before the end of 2018, which aligns consideration with EBITDA growth. SemGroup will have no obligation to make the second payment, which instead will be an obligation of its acquisition subsidiaries and secured by a pledge of the equity interests in such subsidiaries. The purchase price will be subject to customary adjustments.

Chris Beale, Managing Partner of Alinda Capital Partners, said: “The HFOTCO management team has done an excellent job of growing and diversifying a world-class terminal business. We believe that adding this asset to SemGroup’s portfolio is a great way to leverage customer relationships, strengthen both businesses and create additional shareholder value.”

The acquisition is expected to close in third-quarter 2017, subject to the receipt of certain governmental approvals and the satisfaction of other customary closing conditions.

SemGroup intends to maintain the terminal’s workforce and anticipates that the company’s approximately 125 employees will be absorbed by SemGroup upon the transaction’s close.

“A large part of HFOTCO’s success has been its outstanding team,” Conner said. “We’re looking forward to these talented employees becoming part of the SemGroup team.”