Delek Logistics Partners, LP - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed on May 15, 2020, by Delek Logistics Partners, LP (Delek Logistics). The report details a material definitive agreement involving the acquisition of trucking assets and the entry into a long-term transportation services agreement. The transaction is effective as of May 1, 2020.
Key Financial Metrics and Transaction Details
- Acquisition Consideration: Approximately $48 million, subject to post-closing adjustments.
- Financing: Funded through a combination of cash on hand and borrowings under Delek Logistics' revolving credit facility.
- Assets Acquired: All issued and outstanding membership interests in Delek Trucking, LLC, including leased and owned tractors, trailers, and related assets used for crude oil and petroleum transportation in Arkansas, Oklahoma, and Texas.
- Revenue Commitments: The filing does not provide specific revenue, profit, or margin figures for the period. However, the new Transportation Services Agreement (TSA) includes a deficiency payment mechanism if revenue from the services fails to meet certain minimum commitments.
Material Changes and Agreements
Delek Logistics acquired Delek Trucking, LLC from Lion Oil Company, a subsidiary of Delek US Holdings, Inc. (Delek US). Following the acquisition, Delek Trucking merged into DKL Transportation, LLC. Concurrently, Delek Refining, Lion Oil, and DKL Transportation entered into a Transportation Services Agreement (TSA). Under the TSA, Delek Refining and Lion Oil committed to use DKL Transportation for all required transportation services in the specified regions. The TSA includes a minimum revenue commitment with a deficiency payment provision and grants DKL Transportation access to necessary facilities.
Outlook, Risks, and Related Party Transactions
The TSA has an initial term extending to December 31, 2030, with automatic two-year renewals unless terminated with 12 months' written notice. This transaction is a related party transaction as Delek US owns a 70.5% limited partnership interest in Delek Logistics and controls the General Partner. The Conflicts Committee of the General Partner's Board of Directors, comprised solely of independent directors, approved the acquisition and the TSA. The Committee relied on an opinion from an independent financial advisor stating that the consideration was fair to Delek Logistics and its unaffiliated unitholders. The filing notes that certain individuals serve as officers or directors across multiple related entities, creating potential conflicts of interest managed by the Conflicts Committee.
Key Facts for Investor Verification
- Verify the exact post-closing adjustment amount to the $48 million purchase price.
- Review the specific minimum revenue commitments and deficiency payment thresholds in the Transportation Services Agreement (Exhibit 10.1).
- Assess the impact of the additional borrowings under the revolving credit facility on the company's liquidity and debt covenants.
- Confirm the integration timeline and operational synergies expected from merging Delek Trucking into DKL Transportation.
- Monitor future filings for any changes in the related party transaction terms or the Conflicts Committee's oversight.