Business Context and Reporting Period
This Form 8-K filing by MPLX LP (the "Partnership") reports a material definitive agreement and asset acquisition completed on September 1, 2017. The Partnership entered into a Membership Interests and Shares Contributions Agreement with subsidiaries of Marathon Petroleum Corporation ("MPC") to acquire ownership interests in several joint venture entities.
Key Financial Metrics and Transaction Details
The transaction involved the acquisition of assets valued at approximately $630 million in total consideration, consisting of approximately $420 million in cash and equity. The Partnership issued the following securities to effect the transaction:
- 13,719,017 Common Units issued to MPLX GP LLC (General Partner).
- 3,350,893 Common Units issued to MPLX Logistics Holdings LLC.
- 1,441,224 Common Units issued to MPLX Holdings Inc.
- 377,778 General Partner Units issued to the General Partner to maintain its 2% interest.
Post-transaction, MPC indirectly holds approximately 29% of the Partnership's outstanding Common Units (118,090,823 units) and retains all incentive distribution rights.
Material Changes and Acquired Assets
The Partnership acquired the following interests from MPC Investment LLC:
- 100% of membership interests in Lincoln Pipeline LLC (holding a 35% interest in Illinois Extension Pipeline Company, L.L.C.).
- 100% of membership interests in MPL Louisiana Holdings LLC (holding a 40.7% interest in LOOP LLC).
- A 58.52% interest in LOCAP LLC.
- A 24.51% interest in Explorer Pipeline Company.
Financial statements for the acquired entities (Explorer Pipeline, Illinois Extension Pipeline, LOOP LLC, and LOCAP LLC) for periods ending December 31, 2016, and June 30, 2017, are filed as exhibits but specific revenue or profit figures for these entities are not detailed in the text of this summary.
Guidance, Outlook, and Related Party Transactions
The transaction was approved by the conflicts committee and board of directors of the General Partner, who retained independent legal and financial advisors. The issuance of Common Units and General Partner Units was exempt from registration under Section 4(a)(2) of the Securities Act of 1933. Unaudited pro forma consolidated financial statements for MPLX LP reflecting the transaction are included in Exhibit 99.9.
Investor Verification Checklist
- Review the full text of the Membership Interests and Shares Contributions Agreement (Exhibit 2.1) for specific terms and covenants.
- Analyze the unaudited pro forma consolidated financial statements (Exhibit 99.9) to assess the immediate impact on MPLX LP's earnings and balance sheet.
- Examine the audited and unaudited financial statements of the acquired entities (Exhibits 99.1 through 99.8) to evaluate the quality of earnings and cash flows of the new assets.
- Verify the valuation methodology used to determine the $630 million total consideration.
- Confirm the updated ownership structure and the extent of MPC's indirect control following the issuance of new units.