LONDON, UK / ACCESSWIRE / August 16, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Andeavor Logistics L.P. (NYSE: ANDV), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=ANDV. The Company announced on August 14, 2017, a merger agreement with Western Refining Logistics L.P. (NYSE: WNRL) ("WNRL"), pursuant to which Andeavor Logistics will acquire WNRL in a unit-for-unit transaction for an enterprise value of 1.8 billion, including the assumption of around $310 million of WNRL's net debt. The agreement also covers the financial repositioning of Andeavor Logistics through a buy-in of Andeavor Logistics` incentive distribution rights ("IDRs"). For immediate access to our complimentary reports, including today's coverage, register for free now at:
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Andeavor (NYSE: ANDV) and Andeavor Logistics also announced an agreement, wherein Andeavor Logistics has to issue 78.0 million ANDX's common units to Andeavorin exchange for the cancellation of Andeavor Logistics' IDRs ("IDR Buy-In"). These transactions have been approved by the Boards of Directors of all three companies as well as the conflicts committees of both MLPs.
Transaction to Improve Financial Strength of Andeavor Logistics
Greg Goff, Chairman and Chief Executive Officer (CEO) of Andeavor, and CEO of Andeavor Logistics' and WNRL's general partners, said:
"Andeavor Logistics is well positioned for sustainable growth through the execution of our organic growth programs and strategic acquisitions, including drop downs from Andeavor. The transactions announced today significantly improve the financial strength of Andeavor Logistics, reduce our cost of capital, and clearly highlight the value of this growth business."
Terms of the Merger Agreement
As per the merger agreement, WNRL's unitholders will receive an exchange ratio of 0.5233 ANDX common units for each WNRL's common unit held. The exchange ratio of 0.5233 is valued at $25.28 per WNRL's common unit, reflecting a premium of 6.4% based on WNRL's closing unit price on August 11, 2017. It also represents a 6.9% premium to the volume weighted average closing price over the last 30 trading days.
Andeavor`s effective implied exchange ratio is 0.4639 ANDX's common units for each WNRL's common unit held by Andeavor. This represents no premium to the exchange ratio based on ANDX`s and WNRL`s closing unit prices on April 13, 2017, one trading day prior to Andeavor Logistics` initial 13D filing on April 17, 2017.
The effective blended exchange ratio is 0.4921 ANDX's common units for each WNRL's common unit. The effective blended exchange ratio is valued at $23.77 per WNRL's common unit.
Terms of the IDR Buy-In Agreement
As per the IDR Buy-In agreement, and following the merger, Andeavor Logistics will issue 78.0 million ANDX's common units to Andeavor in exchange for the cancellation of Andeavor Logistics` IDRs and the conversion of its economic general partner interest into a non-economic general partner interest. Following the IDR Buy-In, Andeavor will continue to own the non-economic general partner interest in Andeavor Logistics and hold around 127 million ANDX's common units, representing approximately 59% of the common units outstanding.
The 78.0 million ANDX's common units represent $3.8 billion in value based on Andeavor Logistics' closing unit price of $48.31 on August 11, 2017, and $4.0 billion in value based on the volume weighted average closing price over the last 30 trading days. Andeavor is also likely to increase existing distribution waivers in 2017-2019 by $60 million to $160 million.
Transaction Subject to Customary Closing Conditions
The Merger transaction and IDR Buy-In, likely to close in Q4 2017, is subject to customary closing conditions, including regulatory and approval from holders of a majority of the WNRL's units.
Following the merger, Greg Goff will continue to serve as Chairman and CEO, and Steven Sterin as President and Chief Financial Officer (CFO) of the general partner of Andeavor Logistics.
Strategic Benefits of the Agreement
- Greater Organic Growth Opportunities: Andeavor Logistics plans to spend at least $500 million - $600 million per year on organic growth and acquisitions. The merger agreement positions Andeavor Logistics to capture additional organic growth opportunities of WNRL, including entry into the prolific Permian Basin and the Conan Crude Oil Pipeline System in the Delaware Basin.
- Enhanced Distribution Growth and Distribution Coverage: Andeavor Logistics targets long-term, sustainable annual distribution growth of 6%, or greater, a distribution coverage ratio of approximately 1.1x and debt-to-EBITDA at or below 4.0x by the end of 2017. Positions Andeavor Logistics as a growth-oriented, full-service and diversified midstream company.
- Enhanced Capital Structure and Improved Cost of Capital: The transactions strengthen the credit profile and position Andeavor Logistics for an investment grade credit rating. The IDR Buy-In also lowers the marginal cost of capital to support sustainable, long-term growth and significantly reduces need for new public equity issuances.
- Better Alignment and More Transparent Value: These transactions simplify the corporate structure resulting in Andeavor owning around 59% of Andeavor Logistics, the latter being valued at $6.1 billion. These transactions achieve expected distributable cash flow accretion by H2 2019 for Andeavor Logistics unit-holders.
Last Close Stock Review
Andeavor Logistics' share price finished yesterday's trading session at $46.82, slipping 1.70%. A total volume of 558.43 thousand shares have exchanged hands, which was higher than the 3-month average volume of 369.43 thousand shares. The Company's stock price advanced 2.79% in the previous twelve months. Shares of the Company have a PE ratio of 23.92 and have a dividend yield of 8.29%. The stock currently has a market cap of $5.21 billion.
On Tuesday, August 15, 2017, the stock closed the trading session at $24.15, dropping 1.63% from its previous closing price of $24.55. A total volume of 410.94 thousand shares have exchanged hands, which was higher than the 3-month average volume of 288.68 thousand shares. Western Refining Logistics' stock price advanced 0.21% in the past six months. Furthermore, since the start of the year, shares of the Company have surged 13.11%. The stock is trading at a PE ratio of 18.28 and has a dividend yield of 7.74%. At Tuesday's closing price, the stock's net capitalization stands at $1.49 billion.
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