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  4. Southcross and TexStar announce combination agreement

Southcross and TexStar announce combination agreement

 

World Â鶹´«Ã½Ó³»­,

Southcross Energy LLC has announced that it has entered into a definitive agreement to combine with TexStar Midstream Services, LP, a privately held gas gathering and processing partnership located in the Eagle Ford shale region of South Texas. The transaction will create the premier Eagle Ford-focused midstream combination, which will include four processing plants, three fractionation facilities and approximately 3700 miles of pipeline.

After the transaction closes, a newly formed company, Southcross Holdings LP will own 100% of the general partner of Southcross and equity interests in Southcross as well as former TexStar assets. EIG Global Energy Partners, Charlesbank Capital Partners and Tailwater Capital will each indirectly own approximately one-third of Holdings.

Simultaneously with closing, Southcross will acquire roughly one-third of TexStarÂ鶹´«Ã½Ó³»­™s midstream assets for approximately US$ 450 million, consisting of US$ 180 million in cash and 14.633 million newly-issued payment-in-kind Southcross common units. The acquisition is expected to be accretive to SouthcrossÂ鶹´«Ã½Ó³»­™ distributable cash flow during the first year of operations. Holdings expects to offer over time TexStarÂ鶹´«Ã½Ó³»­™s remaining midstream assets to be sold as drop-downs into Southcross.

Strategic highlights of transaction

  • Scale Â鶹´«Ã½Ó³»­“ Significantly increases size of Southcross, enhancing its ability to attract rich gas in the Eagle Ford region. 
  • Growth Â鶹´«Ã½Ó³»­“ Supports sustainable distribution growth for Southcross through expected future drop-downs of the substantial assets remaining at Holdings. 
  • Operational and Financial Stability Â鶹´«Ã½Ó³»­“ More predictable distributable cash flow and enhanced customer service is expected from the large interconnected asset base in South Texas. 
  • Integrated Business Â鶹´«Ã½Ó³»­“ SouthcrossÂ鶹´«Ã½Ó³»­™ existing model of an integrated wellhead to end user midstream business is complemented by the TexStar assets. Synergies Â鶹´«Ã½Ó³»­“ Significant capital expenditure savings accrue through the combination of existing capacities.
  • Strong Sponsorship Â鶹´«Ã½Ó³»­“ Board leadership and financial backing come from three leading private equity sponsors: EIG Global Energy Partners, Charlesbank Capital Partners and Tailwater Capital.

Adapted from press release by