American Midstream Partners to acquire Southcross Energy Partners

American Midstream Partners (AMID) announced that it has signed an agreement to acquire certain assets of Southcross Holdings, and has proposed to merge Southcross Energy Partners (SXE) into a wholly owned subsidiary of AMID in two separate transactions valued at approximately $815 million, including the repayment of net debt.

As a result of the transactions, the pro forma partnership with an enterprise value of $3 billion is expected to generate annualized 2018 Adjusted EBITDA in excess of $300 million.

AMID has agreed to acquire equity interests in certain Southcross Holdings’ subsidiaries that directly or indirectly own 100% of the limited liability company interests of the general partner of SXE and approximately 55% of the SXE common units by issuing 3.4 million AMID common units, 4.5 million new Series E convertible preferred units, options to acquire 4.5 million AMID common units and the repayment of $139 million of estimated net debt.

The Preferred Units will be issued at a price of $15.00 per unit and may be paid-in-kind at the AMID common unit distribution rate at AMID’s option for two years. AMID will have the right to convert the Preferred Units to AMID common units if the AMID 20-day volume weighted average price exceeds $22.50.

The Options are American-style call options with an $18.50 strike price that expire in 2022.

Public unitholders of SXE will receive 0.160 AMID common units for each SXE common unit in a unit-for-unit merger, which is anticipated to have minimal, if any, tax recognition for such unitholders and which represents a 5% premium to the 20-day volume weighted average exchange ratio of AMID and SXE common units as of October 30, 2017.

The SXE transaction is conditioned on the Southcross Holdings transaction, and until both transactions have closed AMID, Southcross Holdings and SXE will continue to operate as separate companies.

AMID expects the proposal to be attractive to public holders of SXE common units as it will permit them to participate in the future anticipated growth of AMID’s businesses, including the benefit of AMID’s cash distributions on common units, currently paying $1.65 per common unit annually.

SXE closed at $2.10. AMID closed at $13.55.

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