OREANDA-NEWS.   PetroLogistics LP (NYSE: PDH) announced today that it and its general partner, PetroLogistics GP LLC, have entered into a definitive agreement to be acquired by Flint Hills Resources, LLC, a subsidiary of Koch Industries, Inc. Under the terms of the acquisition agreement (“Merger Agreement”), Flint Hills Resources will acquire all of PetroLogistics’ outstanding common units for USD 14.00 per common unit in cash, except for those common units owned by Lindsay Goldberg LLC (“Lindsay Goldberg”), York Capital Management (“York Capital”), PetroLogistics’ Executive Chairman and its President and Chief Executive Officer, which will be acquired for USD 12.00 per common unit in cash.

In addition, PetroLogistics expects to continue to make distributions consistent with its historical distribution policy through the closing date of the transaction. If the closing date occurs before the announced record date for any quarterly distribution, the record date for such quarterly distribution will be the business day immediately before the transaction’s closing date. PetroLogistics will also make a final, one-time, cash distribution in connection with, and conditioned upon, the closing of the transaction, which is calculated to approximate the distribution that would have been earned through the closing date, subject to an additional reserve of approximately USD 12.3 million to cover transaction related costs. The record date for the final, one-time, cash distribution will be the business day immediately before the closing date of the transaction. Flint Hills Resources will also acquire all of the membership interests in PetroLogistics GP for no additional consideration.

The all-cash transaction is valued at approximately USD 2.1 billion, including the assumption of debt. Based on the closing unit price on May 27, 2014, the USD 14.00 per unit purchase price represents a premium in excess of 8% to the publicly-traded units. The closing of the transaction is expected to occur before year end and is subject to customary closing conditions and regulatory approvals. Additionally, the consummation of the transaction is subject to a requirement that PetroLogistics’ facility perform at a certain level of production for a period of four days before the closing, and to PetroLogistics’ receipt of a legal opinion regarding certain tax matters.

The Merger Agreement has been approved by the boards of directors of both PetroLogistics GP and Flint Hills Resources. Lindsay Goldberg, York Capital, PetroLogistics’ Executive Chairman and its President and Chief Executive Officer, owning common units representing, in the aggregate, approximately 73% of the outstanding common units, have delivered a written consent approving the transaction and have entered into support agreements with Flint Hills Resources pursuant to which they have agreed to support the transaction until it is consummated or until the Merger Agreement is terminated. No additional unitholder action is required to approve the transaction.

Under the Merger Agreement, until 11:59 p.m. (Central Time) on July 6, 2014, PetroLogistics may, subject to certain conditions, provide certain information to and enter into discussions and negotiations with any third party that submits an unsolicited qualifying superior acquisition proposal. In response to such a proposal, under certain circumstances, the board of directors of PetroLogistics GP may, after providing Flint Hills Resources the opportunity to match the proposal, terminate the Merger Agreement with Flint Hills Resources and enter into or recommend a transaction with the third party that submitted the proposal. In that event, Flint Hills Resources would receive a USD 57 million termination fee from PetroLogistics. In addition, in that event Flint Hills Resources may be entitled to receive from Lindsay Goldberg and York Capital 50% of any incremental value received by them upon consummation of such a transaction, up to a total cap of USD 50 million.
 
“PetroLogistics built this facility from the ground up. It is a world-class operation,” said Brad Razook, Flint Hills Resources President and Chief Executive Officer. “Its capabilities are well aligned with our existing chemical and refining business. We look forward to welcoming PetroLogistics employees to Flint Hills Resources as we work together to build on their success.”

Goldman Sachs & Co. is acting as financial advisor and Jones Day is acting as legal advisor to Flint Hills Resources. Morgan Stanley & Co. LLC and Evercore Partners are acting as financial advisors to PetroLogistics and have delivered fairness opinions, and Weil, Gotshal & Manges LLP and Vinson & Elkins LLP are acting as legal advisors to PetroLogistics.