American Midstream to acquire Blackwater Midstream

American Midstream Partners LP

American Midstream Partners LP (NYSE: AMID) is set to acquire Blackwater Midstream Holdings LLC, a developer and operator of terminal storage facilities, from an affiliate of ArcLight Capital Partners LLC for $60 million.

The purchase price is payable in a combination of cash and approximately $3.0 million of American Midstream common units, and the aggregate consideration includes the payoff of existing indebtedness of Blackwater.

Blackwater generated annualized Adjusted EBITDA of approximately $7.7 million based on the quarter ended September 30, 2013, and the Partnership expects Blackwater’s annualized EBITDA to remain approximately the same in the fourth quarter of 2013 and increase in 2014 as a result of organic growth and newbuild projects currently underway with new and existing customers.

The acquisition includes Blackwater’s three operating terminal sites located in Westwego, Louisiana; Brunswick, Georgia; and Salisbury, Maryland. The sites are multimodal, with access to deepwater dock, barge, rail, and truck transportation. The transaction also includes a brownfield development opportunity in Harvey, Louisiana, located near Blackwater’s Westwego terminal.

The acquisition is expected to be immediately accretive to American Midstream’s current distribution, and it creates a strong and competitive position in a segment of the midstream industry that is characterized by fee-based contracts that are not directly subject to commodity price volatility. In addition, the merger agreement provides for American Midstream to pay an earn-out of up to $5 million, if, during the next five years, the trailing-12-month EBITDA from operations at the Harvey site exceeds $5 million.

The three operating terminals have a total of 1.3 million barrels of storage capacity and store a variety of products including chemical, agricultural, and petroleum liquid products. The revenues are fee-based and almost entirely derived from take-or-pay lease contracts. Both the Westwego and Brunswick sites are operating at capacity and have the potential for additional expansions. The Harvey development site is expected to begin operations in 2014, with the potential for up to two million barrels of capacity when fully developed, which would increase Blackwater’s total barrels of storage by more than 100%.

The transaction is expected to close in the fourth quarter of 2013.

Related to this news, American Midstream Partners has begun an underwritten public offering of 2,400,000 of its common units representing limited partner interests. The Partnership also intends to grant the underwriters a 30-day option to purchase up to 360,000 additional common units.

The Partnership intends to use the net proceeds from this offering to fund a portion of the $60 million purchase price for the Blackwater acquisition. Barclays will act as sole book-running manager for the offering.

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