Permanent elimination of incentive distribution rights provides
significant improvement to Crestwood’s cost of capital
Immediately improved coverage ratio; Repositioned for accelerated
future distribution growth
Simplification of corporate structure streamlines corporate strategy
and operating footprint and improves Crestwood’s competitive position
HOUSTON--(BUSINESS WIRE)--May 6, 2015--
Crestwood Equity Partners LP (NYSE:CEQP) (“Crestwood Equity”) and
Crestwood Midstream Partners LP (NYSE:CMLP) (“Crestwood Midstream”)
(collectively “Crestwood”) today announced the signing of a definitive
agreement to merge the two partnerships and simplify Crestwood’s
corporate structure into a single publicly-traded partnership with a
consolidated enterprise value of approximately $7.5 billion.
Under the terms of the merger agreement, which has been unanimously
approved by the boards of directors of Crestwood Equity and Crestwood
Midstream, based on the unanimous approval and recommendation of their
respective conflicts committees, which each consisted entirely of
independent directors, Crestwood Midstream will merge with a newly
formed subsidiary of Crestwood Equity in a merger in which Crestwood
Midstream unitholders will receive 2.75 units of Crestwood Equity for
each unit of Crestwood Midstream they own, representing a 17% premium to
the closing price of Crestwood Midstream’s units as of May 5, 2015.
Following the completion of the merger, Crestwood Midstream will cease
to be a publicly traded partnership but will survive as a wholly-owned
subsidiary of Crestwood Equity, and the incentive distribution rights of
Crestwood Midstream will be permanently eliminated. Crestwood Holdings
LLC will continue to own the general partner of Crestwood Equity, which
will continue to be listed on the NYSE under the ticker symbol CEQP.
“Over the last year, Crestwood has evaluated a number of strategic
alternatives to improve our competitive position in the marketplace and
unlock the true value of our asset portfolio,” said Robert G. Phillips,
Chairman, President and CEO of Crestwood. “By combining our partnerships
and simplifying our corporate structure, we are better able to execute
on our strategic objectives of fundamental value creation through
providing first-class customer service and by executing on organic
expansion and acquisition opportunities around our portfolio of
midstream assets.”
“Through all market cycles, particularly during periods of challenging
commodity price cycles like we are currently enduring, cost of capital
remains a critical driver of competitive positioning in the
marketplace,” added Phillips. “We have visibility to greater than $3.0
billion of investment opportunities around our asset footprint largely
focused on the majority of the premier shale plays in North America. The
permanent elimination of our incentive distribution rights immediately
improves our future cost of capital and better positions Crestwood to
capture our share of the opportunities in front of us.”
Strategic Highlights
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Immediately improved cost of capital: Permanent
elimination of Crestwood’s incentive distribution rights drives
immediate cost of capital improvement that allows the partnership to
be more competitive for future growth opportunities.
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Greater growth and stability in distributions:
Pro forma for the transaction, Crestwood Equity is immediately able to
cover the current $0.55 per unit distribution and provide for
longer-term distribution increases to all unitholders more in-line
with the embedded growth of the asset portfolio.
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Drives unified corporate strategy: The
transaction eliminates perceived conflicts of interest arising from
financial complexity and allows the combined partnership to focus
exclusively on its core strategy of servicing the full midstream value
chain in the premier shale plays in North America.
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Simplified corporate structure more appealing to
all stakeholders: Creates a simplified entity that
should attract a broader universe of investors as well as an improved
credit profile due to the elimination of structural subordination in
our capital structure. Further, the simplification of Crestwood’s
governance structure better positions the partnership to participate
in the continuing trend of industry consolidation.
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Further reductions to administrative costs:
As a result of consolidating into a single public entity,
Crestwood estimates another $5 million of incremental cost savings can
be achieved and added to the $25 million to $30 million run-rate
savings identified as a part of Crestwood’s 2015 cost reduction
initiatives.
Approvals
The transaction is expected to close in the third quarter of 2015 and is
subject to customary closing conditions, including approval of a
majority of the unitholders of Crestwood Midstream. Crestwood Holdings
LLC has entered into a support agreement to vote its limited partner
interests in favor of the transaction. Magnetar Capital, affiliates of
GSO Capital Partners LP, and GE Energy Financial Services, a unit of GE,
(collectively, the “Class A Preferred Holders”), have entered into
agreements by which they agreed, subject to certain conditions specified
in such agreements, to receive new preferred units in Crestwood Equity
under substantially equivalent terms in exchange for their existing
preferred units in Crestwood Midstream. Additionally, under the terms of
the existing Crestwood Midstream Class A Preferred Units, the Class A
Preferred Holders, who have indicated their current intent to support
the transaction, have the right to vote their units with the Crestwood
Midstream common unitholders on an “as converted” basis. Collectively,
Crestwood Equity, Crestwood Holdings, Crestwood management, the boards
of directors, and the Class A Preferred Holders own approximately 26% of
the total Crestwood Midstream units outstanding.
Advisors
Citigroup Global Markets Inc. acted as exclusive financial advisor to
Crestwood, and Andrews Kurth LLP and Simpson Thacher & Bartlett LLP
acted as legal counsel to Crestwood. Evercore Partners served as
exclusive financial advisor to the Conflicts Committee of the Crestwood
Equity Board of Directors and provided a fairness opinion on the
proposed transaction, and Locke Lord LLP served as legal counsel to the
Crestwood Equity Conflicts Committee. Tudor, Pickering, Holt & Co.
served as exclusive financial advisor to the Conflicts Committee of the
Crestwood Midstream Board of Directors, and Paul Hastings LLP served as
legal counsel to the Crestwood Midstream Conflicts Committee.
Conference Call
Management will host a conference call for investors and analysts of
Crestwood today at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) which
will be broadcast live over the Internet. Investors may participate in
the call either by phone or audio webcast.
By Phone:
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Dial 201-689-8037 or 877-407-8037 at least 10 minutes before the
call and ask for the Crestwood Earnings Call. A replay will be
available for 7 days by dialing 877-660-6853 or 201-612-7415 and
using the access code 13608046#.
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By Webcast:
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Connect to the webcast via the “Presentations” page of Crestwood’s
Investor Relations website at www.crestwoodlp.com.
Please log in at least 10 minutes in advance to register and
download any necessary software. A replay will be available
shortly after the call for 90 days.
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Additional Information and Where to Find It
This press release contains information about the proposed merger
involving Crestwood Equity and Crestwood Midstream. In connection with
the proposed merger, Crestwood Equity will file with the SEC a
registration statement on Form S-4 that will include a proxy
statement/prospectus for the unitholders of Crestwood Midstream.
Crestwood Midstream will mail the final proxy statement/prospectus to
its unitholders. INVESTORS AND UNITHOLDERS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED
WITH THE SEC CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT CRESTWOOD EQUITY, CRESTWOOD
MIDSTREAM, THE PROPOSED MERGER AND RELATED MATTERS. Investors and
unitholders will be able to obtain free copies of the proxy
statement/prospectus (when available) and other documents filed with the
SEC by Crestwood through the website maintained by the SEC at www.sec.gov.
In addition, investors and unitholders will be able to obtain free
copies of documents filed by Crestwood with the SEC from Crestwood’s
website, www.crestwoodlp.com.
Participants in the Solicitation
Crestwood Equity, Crestwood Midstream, and their respective general
partner’s directors and executive officers may be deemed to be
participants in the solicitation of proxies from the unitholders of
Crestwood Midstream in respect of the proposed merger transaction.
Information regarding the persons who may, under the rules of the SEC,
be deemed participants in the solicitation of the unitholders of
Crestwood Midstream in connection with the proposed transaction,
including a description of their direct or indirect interests, by
security holdings or otherwise, will be set forth in the proxy
statement/prospectus when it is filed with the SEC. Information
regarding Crestwood Midstream’s directors and executive officers is
contained in Crestwood Midstream’s Annual Report on Form 10-K for the
year ended December 31, 2014, which is filed with the SEC on March 2,
2015, and any subsequent statements of changes in beneficial ownership
on file with the SEC. Information regarding Crestwood Equity’s directors
and executive officers is contained in Crestwood Equity’s Annual Report
on Form 10-K for the year ended December 31, 2014, which is filed with
the SEC on March 2, 2015, and any subsequent statements of changes in
beneficial ownership on file with the SEC. Free copies of these
documents may be obtained from the sources described above.
Forward-Looking Statements
The statements in this communication regarding future events,
occurrences, circumstances, activities, performance, outcomes and
results are forward-looking statements. Although these statements
reflect the current views, assumptions and expectations of Crestwood’s
management, the matters addressed herein are subject to numerous risks
and uncertainties which could cause actual activities, performance,
outcomes and results to differ materially from those indicated. Such
forward-looking statements include, but are not limited to, statements
about the benefits that may result from the merger and statements about
the future financial and operating results, objectives, expectations and
intentions and other statements that are not historical facts. Factors
that could result in such differences or otherwise materially affect
Crestwood’s financial condition, results of operations and cash flows
include, without limitation, the possibility that expected cost
reductions will not be realized, or will not be realized within the
expected timeframe; fluctuations in crude oil, natural gas and NGL
prices (including, without limitation, lower commodity prices for
sustained periods of time); the extent and success of drilling efforts,
as well as the extent and quality of natural gas and crude oil volumes
produced within proximity of Crestwood assets; failure or delays by
customers in achieving expected production in their oil and gas
projects; competitive conditions in the industry and their impact on our
ability to connect supplies to Crestwood gathering, processing and
transportation assets or systems; actions or inactions taken or
non-performance by third parties, including suppliers, contractors,
operators, processors, transporters and customers; the ability of
Crestwood to consummate acquisitions, successfully integrate the
acquired businesses, realize any cost savings and other synergies from
any acquisition; changes in the availability and cost of capital;
operating hazards, natural disasters, weather-related delays, casualty
losses and other matters beyond Crestwood’s control; timely receipt of
necessary government approvals and permits, the ability of Crestwood to
control the costs of construction, including costs of materials, labor
and right-of-way and other factors that may impact Crestwood’s ability
to complete projects within budget and on schedule; the effects of
existing and future laws and governmental regulations, including
environmental and climate change requirements; the effects of existing
and future litigation; and risks related to the substantial
indebtedness, of either company, as well as other factors disclosed in
Crestwood’s filings with the U.S. Securities and Exchange Commission.
You should read filings made by Crestwood with the U.S. Securities and
Exchange Commission, including Annual Reports on Form 10-K and the most
recent Quarterly Reports and Current Reports for a more extensive list
of factors that could affect results. Readers are cautioned not to place
undue reliance on forward-looking statements, which reflect management’s
view only as of the date made. Crestwood does not assume any obligation
to update these forward-looking statements.
About Crestwood Midstream Partners LP
Houston, Texas, based Crestwood Midstream (NYSE: CMLP) is a master
limited partnership that owns and operates midstream businesses in
multiple unconventional shale resource plays across the United
States. Crestwood Midstream is engaged in the gathering, processing,
treating, compression, storage and transportation of natural gas;
storage, transportation and terminalling of NGLs; and gathering,
storage, terminalling and marketing of crude oil.
About Crestwood Equity Partners LP
Houston, Texas, based Crestwood Equity Partners LP (NYSE: CEQP) is a
master limited partnership that owns the general partner interest,
including the incentive distribution rights and approximately 4% of the
outstanding common units of Crestwood Midstream. In addition, Crestwood
Equity’s operations include an NGL supply and logistics business that
serves customers in the United States and Canada.
Source: Crestwood Midstream Partners LP
Investor Contact
Crestwood Equity Partners LP
Crestwood
Midstream Partners LP
Josh Wannarka, 713-380-3081
josh.wannarka@crestwoodlp.com
Vice
President, Investor Relations