PBF Logistics LP will acquire the remaining 50 percent interest in Torrance Valley Pipeline Co. LLC, the owner of the 189-mile San Joaquin Valley Pipeline system.
Through the execution of definitive agreements, Parsippany-based PBF announced on Thursday that it would purchase TVPC from an affiliate of PBF Energy Inc. for approximately $200 million cash.
PBF Logistics said that financing for the deal is made up of a combined $135 million gross proceeds from its over-subscribed registered direct offering of common units to certain investors, and a $65 million draw-down from the company’s senior secured revolving credit facility.
The accord will double PBF Logistics’ position in one of the limited partnership’s core assets, the company said, and will immediately have an accretive effect on distributable cash flow.
In addition to the Pipeline system, which boasts a throughput capacity of 110,000 barrels per day, TVPC’s assets include 11 pipeline stations with a combined storage capacity of about one million barrels, and combined storage capacity and truck unloading at two stations. The system is made up of the primarily crude gathering M55, M1 and M70 pipelines, which PBF Logistics said supply its PBF Energy refinery in Torrance, Calif.
The newly-acquired interests of TVPC would be expected to generate an estimated annual net income of about $15.5 million, based on revenues of approximately $44 million and estimated earnings before interest, taxes, depreciation and amortization (EBITDA) of about $25 million, according to PBF Logistics, with annual maintenance capital expenditures averaging at about $1.5 million.
Pursuant to the agreement, upon closing PBF Logistics would consolidate its existing 10-year transportation services agreements with subsidiaries of PBF Energy containing minimum volume throughput commitments (MVCs) of approximately 50,000 barrels per day for M1 and M55 pipelines, increased MVCs of approximately 75,000 barrels per day for the M70 pipeline, and for storage capacity at certain tanks representing approximately 50 percent of the total available shell capacity of the storage facilities.
The deal is expected to close in the second quarter of 2019, subject to customary closing conditions. Terms of the transaction have been approved by the Conflicts Committee of the board of directors — comprised of independent directors and advised financially by Piper, Jaffray & Co., and legally by Baker Botts LLP.
“The acquisition of the remaining 50 percent interest in TVPC reflects PBFX’s ongoing commitment to deliver sustained growth to our unitholders by adding high-quality assets to our earnings base,” PBFX and PBF Energy Chief Executive Officer Thomas Nimbley said in a prepared statement.
“The equity issuance and drop-down transaction were executed in response to high investor demand for investable opportunities in PBF Logistics,” he added. “With this transaction, in combination with our organic growth efforts, we exceed our near-term distribution growth funding requirements and achieve the flexibility to execute our strategic plan without accessing public equity to fund growth capital through 2020.”
PBF Logistics LP is a fee-based, master limited partnership formed by PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets.