Shell Midstream Partners LP executed a purchase and sale agreement to acquire additional interests in Zydeco Pipeline Co. LLC and Colonial Pipeline Co. for $448 million, the company said May 13.
The dropdown acquisition from Shell Pipeline Co. LP is Shell Midstream’s first acquisition since its November 2014 IPO. Shell Pipeline is a wholly owned subsidiary of Royal Dutch Shell Plc (RDS.A).
Shell Midstream Partners’ ownership interest in Zydeco will increase to 62.5%, and its ownership interest in Colonial will increase to 3%. They were 43% and 1.612%, respectively.
Shell Midstream Partners will assume an additional $45 million of adjusted EBITDA over the next 18 months, and the dropdown will be immediately accretive to its distributable cash flow.
Proceeds from a private placement of common units, revolving credit facility borrowings and cash on hand will fund the dropdown, the company said.
The acquisition is scheduled to close May 18, and its effective date is April 1.
"Shell Midstream Partners is committed to delivering top tier distribution growth to unitholders," said Peggy Montana, CEO. "Our initial asset base generates stable and predictable cash flow from long-term fee based contracts. The additional interest in these two key assets will continue to build our cash flow base to help us deliver strong distribution growth."
The acquisition’s terms were approved by Shell Midstream’s general partners’ conflicts committee. The committee is part of the board of directors.
Evercore Group LLC was the committee’s financial adviser. Andrews Kurth LLP was its legal adviser.
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