Business Context and Reporting Period
This Form 8-K Current Report was filed by NGL Energy Partners LP on September 25, 2019. The filing discloses the entry into two material definitive agreements: the acquisition of Hillstone Environmental Partners, LLC and a concurrent private placement of equity securities to fund the transaction.
Key Financial Metrics and Transaction Details
- Acquisition Price: Approximately $600 million in cash for 100% of Hillstone Environmental Partners, LLC.
- Deposit Paid: Approximately $49.9 million deposited as liquidated damages or credit toward the purchase price.
- Financing Raised: $200 million aggregate purchase price for Class D Preferred Units and Warrants.
- Net Proceeds: Estimated at approximately $195.5 million after deducting a $4.0 million closing fee and expenses.
- Warrant Structure: Warrants to purchase 8,500,000 Common Units total:
- 5,000,000 units at an exercise price of $16.28 per unit.
- 3,500,000 units at an exercise price of $13.56 per unit.
Material Changes and Agreements
The Partnership entered into an Equity Purchase Agreement to acquire Hillstone, a water solutions company, to expand its midstream infrastructure portfolio. Simultaneously, the Partnership executed a Class D Preferred Unit and Warrant Purchase Agreement with EIG Neptune Equity Aggregator, L.P., FS Energy and Power Fund, and Foundation Infrastructure Partners. The proceeds from this private placement are designated to fund a portion of the Hillstone Acquisition purchase price.
Outlook, Risks, and Contingencies
- Closing Conditions: The Hillstone Acquisition is subject to customary closing conditions, including the accuracy of representations, performance of covenants, and the expiration of the Hart-Scott-Rodino Antitrust waiting period.
- Timeline: The Partnership expects the acquisition to close in 2019, but there is no assurance of completion within the anticipated timeframe.
- Termination Rights: Both agreements include termination rights if the closing does not occur on or prior to November 30, 2019, unless extended.
- Warrant Vesting: Warrants are exercisable one year after issuance, except in the event of a Class D Change of Control, where they vest immediately.
- Financial Impact: The filing does not provide updated revenue, profit, or cash flow metrics for the reporting period, as it focuses solely on the transaction announcement.
Investor Verification Checklist
- Verify the final closing date of the Hillstone Acquisition against the November 30, 2019 deadline.
- Confirm the satisfaction of antitrust regulatory conditions (Hart-Scott-Rodino Act).
- Monitor the actual net proceeds from the private placement versus the estimated $195.5 million.
- Review the full text of the Class D Preferred Unit and Warrant Purchase Agreement (Exhibit 10.1) for specific dividend rates and redemption terms not detailed in this summary.
- Assess the impact of the $4.0 million closing fee on the overall cost of capital for the transaction.