NuStar Energy L.P. (NYSE: NS) today announced that it has entered into a Purchase and Sale Agreement with an affiliate of Lindsay Goldberg LLC, a private investment firm, to create a joint venture that will own and operate NuStar’s asphalt refining assets and related working capital. NuStar and Lindsay Goldberg will each have a 50% voting interest in the joint venture and Lindsay Goldberg is paying $175 million for its interest. Closing for the transaction is expected to be completed no later than September 30, 2012.
Cash proceeds received by NuStar as a result of this transaction, including the $175 million paid by Lindsay Goldberg, should be in the $400 to $500 million range dependent on the joint venture’s working capital requirements. The joint venture will pay NuStar for inventories transferred at the time of closing and the payment will be financed by a credit facility now being arranged for the joint venture.
Total proceeds are expected to be less than the carrying amount for the assets causing a significant non-cash charge to earnings in the second quarter of 2012. However, as a result of the transaction NuStar expects to deconsolidate the asphalt operations after closing.
The Board of Managers of the joint venture will be chaired by Bill Greehey, currently Chairman of the Board for NuStar Energy L.P. and NuStar GP Holdings, LLC. Michael Pesch, currently Vice President Regional Operations for NuStar Energy L.P., will be the Chief Executive Officer of the joint venture.
“This joint venture transaction allows NuStar to monetize a portion of its asphalt operations and still maintain a 50% interest in a business that has the potential to generate significant cash flows as the U.S. economy improves,” said Curt Anastasio, president and CEO of NuStar. “We expect to use the cash proceeds received from this transaction to pay down a large portion of our debt which should significantly improve NuStar’s leverage metrics.”