Business Context and Reporting Period
This Form 8-K filing by NGL Energy Partners LP (the "Partnership") reports a material definitive agreement entered into on August 12, 2011. The Partnership is a Delaware limited partnership with principal executive offices in Tulsa, Oklahoma.
Key Financial Metrics and Transaction Details
The filing details a Contribution and Sale Agreement with E. Osterman Propane, Inc. and affiliated companies ("Osterman"). Key financial terms include:
- Consideration: Approximately $96,000,000 in cash.
- Equity Issuance: 4,000,000 common units representing limited partnership interests.
- Working Capital: A working capital payment for specified items may be payable by either party.
- Ownership Impact: Upon closing, the Osterman family is expected to hold an approximate 21.3% limited partner interest in the Partnership.
The filing text does not provide specific revenue, profit, cash flow, margin, debt, or liquidity metrics for the Partnership's ongoing operations.
Material Changes and Transaction Scope
The transaction involves the contribution of substantially all assets comprising the propane operations of Osterman to the Partnership. Osterman is an affiliated group of privately owned propane marketing companies operating in Massachusetts, Connecticut, Maine, New Hampshire, New York, Rhode Island, and Vermont. This represents a significant expansion of the Partnership's asset base and geographic footprint.
Outlook, Conditions, and Risks
Closing Timeline: The transaction is expected to close in October 2011.
Conditions to Closing: The deal is subject to customary conditions, including:
- Performance of material covenants.
- Accuracy of representations and warranties.
- Obtaining material consents and approvals, including approval under the Hart-Scott-Rodino Antitrust Improvements Act.
Management Changes: As a condition to closing, Vincent J. Osterman will be appointed to the board of directors of NGL Energy Holdings, LLC, the Partnership's general partner.
Registration Rights: The agreement includes a Registration Rights Agreement for the common units issued in the transaction.
Investor Verification Checklist
- Verify the final closing date and whether the October 2011 target is met.
- Confirm the final working capital adjustment amount and direction (payable by or to the Partnership).
- Monitor the status of Hart-Scott-Rodino Antitrust approval.
- Review the full text of the Osterman Contribution Agreement once filed as an exhibit to assess specific representations and warranties.
- Assess the dilution impact of the 4,000,000 new common units on existing unitholders.