Business Context and Reporting Period
Company: Delek Logistics Partners, LP
Filing Type: Form 8-K (Current Report)
Date of Report: March 2, 2018 (Earliest event reported: February 26, 2018)
Event: Entry into a Material Definitive Agreement to acquire logistics assets from an affiliate.
Key Financial Metrics
Transaction Value: $315 million in cash (subject to post-closing adjustments).
Funding Source: Cash on hand and borrowings under the senior secured revolving credit facility.
Financial Statements: The filing does not provide specific revenue, profit, cash flow, margin, or debt metrics for the reporting period. Item 9.01 indicates that financial statements of the business acquired and pro forma financial information are not applicable.
Material Changes and Transaction Details
- Assets Acquired: Logistics assets associated with a refinery near Big Spring, Texas, and a light products distribution terminal in Stephens County, Oklahoma (Duncan Terminal).
- Counterparties: Assets are being purchased from Delek US Holdings, Inc. and certain subsidiaries (Sellers).
- Related Party Status: Delek US owns a 61.5% limited partnership interest in the Partnership and controls the General Partner. The transaction was approved by the Conflicts Committee of the Board of Directors of the General Partner.
- Future Agreements: At closing, the Partnership will enter into long-term agreements to provide logistics, asphalt handling, and marketing services to the Sellers.
- Closing Timeline: Expected in March 2018.
Guidance, Outlook, and Risks
Management Commentary: The Conflicts Committee retained independent legal and financial advisors. An independent financial advisor opined that the consideration paid was fair to the Partnership and its unaffiliated common unitholders from a financial point of view.
Risks and Contingencies: The transaction is subject to the terms and conditions of the Purchase Agreement. The filing notes that the description of the agreement is qualified by reference to the full text attached as Exhibit 2.1.
Investor Verification Checklist
- Verify the final closing date and any post-closing purchase price adjustments.
- Review the full Asset Purchase Agreement (Exhibit 2.1) for specific covenants, indemnities, and representations.
- Confirm the impact of the $315 million cash outflow on the Partnership's liquidity and leverage ratios.
- Examine the terms of the long-term service agreements to be executed at closing.
- Assess the related-party nature of the transaction given Delek US's significant ownership stake.