IFM Investors agrees $6.5bn Buckeye Partners deal

July 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

July 2019 Issue

IFM Global Infrastructure Fund, a wholly-owned subsidiary of IFM Investors, has agreed to acquire Buckeye Partners LP in an all-cash deal worth $6.5bn. The deal will see IFM pay $41.50 per common unit of Buckeye, a 27.5 percent premium to Buckeye’s closing price on Thursday 9 May, the last day of trading before the deal was announced. Inclusive of net debt, the transaction is valued at around $10.3bn.

Buckeye’s board has unanimously approved the deal, which is expected to close in the fourth quarter of 2019, subject to approval of a majority of the Buckeye unitholders, certain regulatory approvals and other customary closing conditions. After the deal has closed, the companies will continue to operate independently.

Buckeye owns and operates networks of integrated midstream assets, including 6000 miles of pipeline with more than 100 delivery locations and 115 liquid petroleum products terminals with aggregate tank capacity of more than 118 million barrels. Its network of marine terminals lies primarily in the East Coast and Gulf Coast regions of the US, as well as in the Caribbean. IFM is also invested in an American natural gas liquefaction facility called the Freeport LNG and another pipeline infrastructure asset in North America. In May, the firm reported a first-quarter net profit of $80.8m, down from $112.4m for the same period last year. Additionally, its first-quarter revenue was $1.03bn, up from $797.2m.

“This acquisition is aligned with IFM’s focus on investing in high quality, essential infrastructure assets that underpin the economies in which they operate,” said Julio Garcia, head of infrastructure, North America at IFM.

“We are pleased to have the opportunity to bring the Buckeye business and management team under the IFM umbrella,” said Jamie Cemm, executive director at IFM. “The proposed acquisition of Buckeye is a complementary addition to IFM’s substantial investments in energy infrastructure across North America and globally. We look forward to supporting the continuing growth of the business.”

“Buckeye’s board of directors recently reviewed strategic options for the business and determined that IFM’s proposal to acquire Buckeye is in the best interest of Buckeye,” said Clark C. Smith, chairman, president and chief executive of Buckeye. “The proposed transaction will provide immediate and enhanced value for our unitholders with an attractive premium that accelerates long-term returns and represents the underlying value of our business. In addition, the proposed transaction will provide Buckeye with superior access to capital to execute on its long-term business strategy. We look forward to this next chapter in Buckeye’s 133-year story.”

IFM is a leader in infrastructure investing on behalf of institutional investors globally and has $90bn of assets under management, including $39.1bn in infrastructure, which it manages on behalf of more than 370 institutional investors, and takes a long-term approach to investing, with no predetermined time divestiture horizon. The firm targets core infrastructure in developed markets and currently has interests in 32 investments across North America, Australia and Europe, including several midstream assets.

On 1 November 2018, Buckeye’s management announced that they were pursuing several different strategies aimed at creating value for shareholders. Shortly after, in December 2018, Buckeye closed the sale of some non-integrated pipeline and terminal assets for $450m. Then, in January 2019, the company closed on the sale of its 50 percent interest in VTTI for $975m.

Evercore Group LLC are acting as lead financial adviser to IFM, Credit Suisse, Goldman, Sachs & Co. LLC and BofA Merrill Lynch are acting as financial advisers to IFM. White & Case LLP and Baker Botts LLP are acting as legal advisers to IFM. Intrepid Partners, LLC and Wells Fargo Securities, LLC are acting as financial advisers and Cravath, Swaine & Moore LLP are acting as legal adviser to Buckeye.

Richard Summerfield