MPLX LP and MarkWest Energy Partners LP announced that in connection with the merger of MPLX and MarkWest, MPLX has agreed to increase the amount of the cash consideration payable to MarkWest common unitholders by $400 million.
Under the revised terms of the merger agreement, MarkWest common unitholders will receive 1.09 MPLX common units plus a one-time cash payment of approximately $5.21 per MarkWest common unit, for a total consideration of approximately $52.93 per MarkWest common unit, based on fully diluted units currently outstanding and the closing price of MPLX’s common units on Nov. 10, 2015.
Its sponsor, Marathon Petroleum Corp., is contributing the increase in cash merger consideration to MPLX under which no new equity units will be issued to Marathon Petroleum. In addition, as part of the original transaction, Marathon Petroleum will contribute approximately $225 million, based on the price of MPLX’s common units on Nov. 10, 2015, to maintain its 2 percent general partner interest in MPLX. These proceeds will be retained by the partnership to support its growth.
All other terms of the merger agreement announced on July 13, 2015, remain the same. The merger is recommended by the boards of directors of Marathon Petroleum, MPLX and MarkWest, and the executive management of both partnerships also strongly support the transaction and its revised terms.
The proposed transaction will combine MarkWest, the second-largest processor of natural gas in the United States and largest processor and fractionator in the Marcellus and Utica shale plays, with MPLX, a rapidly growing crude oil and refined products logistics partnership sponsored by Marathon Petroleum.
The combination will create one of the largest master limited partnerships (MLPs) and is expected to generate a mid-20 percent compound annual distribution growth rate through 2019.
“The enhancement to the terms of our agreement reflects the commitment of MPLX and its sponsor, Marathon Petroleum Corp., to the combination with MarkWest and our conviction that the transaction will create significant benefits for the unitholders, customers and employees of both partnerships,” said Gary R. Heminger, MPLX chairman and CEO. “This increase substantially enhances the transaction value for MarkWest unitholders, who will not only benefit from significant distribution growth, but also a substantially lower equity yield, investment-grade debt funding costs, enhanced access to capital and liquidity, and a strong general partner prepared to provide support and financial flexibility.”
Even in a challenging environment of lower MLP valuations and higher yields, and in continued support of the combination, MPLX recently affirmed its guidance that creates a mid-20 percent compound annual distribution growth profile through 2019, including a 25 percent distribution growth rate in 2016. Heminger noted that Marathon Petroleum, as the sponsor and general partner, has extensive options available to support the growth profile of the combined partnership, including dropping down the large and growing $1.6 billion inventory of MLP-qualifying earnings before interest, taxes, depreciation and amortization.
“The increased cash consideration and ownership of a higher growth MLP with a strong sponsor provides even more compelling value for MarkWest unitholders, who will own approximately 73 percent of the combined partnership when the transaction is completed,” said Heminger. “Both partnerships’ unitholders can share in the strong upside potential of a combined partnership with multiple operational platforms as well as significant growth and commercial synergy opportunities. Coupled with MarkWest’s $1.5 billion average annual organic capital growth program over the next five years, our substantial resources and strong sponsor will support the combined partnership in unlocking an incremental $6 billion to $9 billion of potential organic growth projects.”
“Our Board continues to support the combination with MPLX and recommends that MarkWest unitholders vote in favor of the merger proposal,” said Frank M. Semple, MarkWest chairman, president and CEO. “The long-term strategic value of the combination with MPLX and the support from Marathon Petroleum is compelling. The increased cash contribution of $400 million substantially enhances the value of the transaction for our unitholders. We are excited to complete the transaction and continue the important work of developing critical midstream projects for our producer customers, and delivering significant unitholder value over the long term.”
The transaction is subject to approval by MarkWest unitholders and other customary closing conditions and, subject to the satisfaction of those conditions, is expected to close in December 2015. The date of the special meeting of MarkWest common unitholders is Dec. 1, 2015. MarkWest unitholders of record as of Oct. 5, 2015, will be entitled to vote on approval of the merger and the associated proposals.
MarkWest unitholders are urged to vote “FOR” the merger and related matters and submit their proxy as promptly as possible, either by telephone, via the internet or by marking, signing and dating the proxy card that was provided to unitholders along with the proxy statement and prospectus. MarkWest expects to mail supplemental proxy materials to its unitholders in the near future.