Business Context and Reporting Period
This Form 8-K Current Report, filed on January 9, 2012, covers events occurring on January 3, 2012, for NGL Energy Partners LP. The filing details the completion of a previously announced acquisition of propane operations from seven companies affiliated with Pacer Propane Holding, L.P. (collectively, "Pacer Propane").
Key Financial Metrics and Transaction Details
The transaction consideration consisted of approximately $30.5 million in cash and the issuance of 1.5 million common units (limited partnership interests) in the Partnership. The acquired assets include retail propane operations across six states (Colorado, Illinois, Mississippi, Oregon, Utah, and Washington), comprising 17 owned or leased customer service centers and satellite distribution locations. A post-closing working capital payment may be payable by either party based on specified items.
Financial statements for the acquired business and pro forma financial information are not included in this filing; they are scheduled to be filed via amendment within 71 days.
Material Changes and Agreements
- Asset Acquisition: Substantially all assets of Pacer Propane's propane operations were contributed to Hicksgas, LLC, a subsidiary of the Partnership.
- Registration Rights: The Partnership's Registration Rights Agreement was amended to grant registration rights for the new Pacer Common Units and increase the total number of permitted demand registrations from six to seven.
- Equity Issuance: 1.5 million common units were issued to Pacer Propane in a private transaction exempt from registration under Section 4(2) of the Securities Act of 1933.
- Governance Changes: Frank B. Mapel, a founder of Pacer Propane, was granted board observer rights via an amendment to the General Partner's LLC Agreement.
- Distribution Waiver: The Partnership Agreement was amended to waive distributions for the quarter ended December 31, 2011, on the newly issued Pacer Common Units.
Guidance, Outlook, and Risks
The filing does not provide specific financial guidance, outlook, or management commentary regarding future performance metrics. The primary risk noted is the potential variability in the final transaction value due to the post-closing working capital adjustment. The filing explicitly states that the agreements contain representations and warranties that should not be relied upon as a description of the state of affairs of the parties.
Investor Verification Checklist
- Verify the final post-closing working capital adjustment amount once calculated.
- Review the upcoming amendment to this 8-K (due within 71 days) for the financial statements of the acquired business and pro forma financial information.
- Confirm the impact of the 1.5 million new common units on existing unit holder dilution.
- Monitor the integration of the 17 new service centers into NGL's existing operations.