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Enterprise Products and Oiltanking join forces

On October 1 Enterprise Products, based out of Houston, Texas, announced it has reached a full merger agreement to take over Oiltanking Partners LP.

Enterprise will be purchasing Oiltanking for an estimated $6 billion.  Earlier, Enterprise had bought controlling interest in the oil storage and terminal business for nearly $4.6 billion, which was part of the larger acquisition process.  The merger is expected to be finished in early 2015.

Enterprise CEO, Michael Creel, commented on the new addition to the company:

We are pleased to announce the execution of this merger agreement that would result in the merger of Oiltanking Partners into Enterprise … The combination of Enterprise’s system of midstream assets and Oiltanking Partners’ access to waterborne markets and crude oil and petroleum products storage assets would extend and broaden Enterprise’s midstream energy services business.

In the announcement Creel also added that Oiltanking unit-holders will benefit from Enterprise’s “scale, diversification and financial flexibility.”  Unit-holders will also benefit from the company’s estimated $6 billion of capital projects which are in the process of being built.  Creel also promised an increase in cash distributions and more daily pay offs from ownership of Enterprise common units.

In the merger agreement, Oiltanking Partners will merge with a subsidiary of Enterprise in a unit-for-unit exchange.  Oiltanking unit-holders will receive 1.3 Enterprise common units for each Oiltanking common unit. According to Jordan Blum of the Houston Business Journal, “This exchange ratio represents a 5.6 percent premium to Oiltanking Partners unit-holders based on the respective closing prices for Enterprise and Oiltanking Partners common units on September 30, 2014, the day before the merger was originally proposed.”

Oiltanking owns marine terminals in the Houston Ship Channel and the Port of Beaumont.  The company has 12 ship and barge docks with crude oil and petroleum storage reaching 24 million barrels. Enterprise’s Mont Belvieu facility is connected to Oiltanking’s marine terminal on the Houston Ship Channel.  According to Creel, the two being connected is a key factor in Enterprise’s growing liquefied petroleum gas export, octane enhancement and propylene businesses.

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