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The Deal: NGL Energy Buys Gavilon's Energy Business for $890M

HOUSTON ( The Deal) -- Tulsa, Okla., energy logistics services provider NGL Energy Partners LP (NGL - Get Report) said Wednesday, Nov. 6, it purchased crude oil transportation and storage provider Gavilon LLC from Ospraie Management, General Atlantic and Soros Fund Management for $890 million, including $200 million in working capital.
NGL said the price works out to 7.5 times Gavilon's 2014 estimated run-rate Ebitda. It will pay for the deal with $240 million of equity under a private placement of units and $650 million of borrowings under its credit facility, which is being boosted by $621 million to $1.67 billion.

The transaction must clear Hart-Scott-Rodino. It's expected to close in December and be immediately accretive to NGL's distributable cash flow per unit.

Gavilon mainly operates integrated crude oil storage, terminal and pipeline assets in Oklahoma, Texas and Louisiana and a complementary crude oil and refined products supply, marketing and logistics, or SM&L, business.

Its crude oil assets include half of Glass Mountain Pipeline, 4.14 owned and 3.85 leased million barrels of storage in Cushing, Okla., a marine terminal and nine truck terminals, including 22 lease automatic custody transfer units.

Through its SM&L business, Gavilon leases a network of 200 trucks, 350 railcars and eight barges to transport crude oil for customers. Gavilon also markets and supplies refined products and natural gas liquids through 300 distribution terminals across 39 states.
NGL expects the transaction to provide it with a portfolio of organic growth opportunities, with $65 million of organic growth capital expenditures associated with the build-out of terminal assets budgeted for the remainder of this year and next.

Because a significant portion of Gavilon's assets are newly constructed, NGL expects maintenance capital expenditures to be less than 5% of Ebitda per year for the next several years.

Gavilon sold its grain and oilseed storage and distribution business to Japan's Marubeni Corp. last year for $5.6 billion, including debt. Morgan Stanley advised Gavilon on that sale.

UBS's John Nesland, Eric Javidi and Carlos Rivero and Locke Lord LLP's Terry Radney and Greg Heath advised NGL. Barclays' Scott Rogan, Jeremy Michael and Alex Stoyanov and Jones Day's Bob Kennedy and Rick Rodriguez assisted Gavilon.

Andrews Kurth LLP's Michael O'Leary represented NGL on the PIPE and Latham & Watkins LLP's Michael Chambers counseled UBS.

By Claire Poole in Houston

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