[ID] => 11071
[post_author] => 34
[post_date] => 2019-05-27 11:33:25
[post_date_gmt] => 2019-05-27 10:33:25
[post_content] => Investment funds are on the prowl again. Over the past couple of months a number of big deals have been reported, mainly in the North American midstream sector – a market where funds can reap the consistent rewards they are looking for.
The biggest deal of all was announced last month, with Buckeye Partners LP agreeing to be acquired by IFM Investors in an all-cash transaction valued at $10.3bn. Perhaps not surprisingly, Buckeye’s board of directors gave its unanimous support to the deal.
On the same day that the Buckeye deal was revealed, NuStar Energy LP said it had signed a definitive stock purchase agreement to sell its St Eustatius bulk liquids storage terminal in the Caribbean to Prostar Capital for some $250m. As with its earlier sale of its European terminals to Inter Pipeline Fund, the transaction will allow NuStar to “improve its debt metrics” and focus on and invest in its core business in the US, primarily on the rapidly growing Permian Basin crude gathering and export network.
Another interesting transaction was announced a few days before those deals, with A&R Logistics being acquired by Wind Point Partners, a Chicago-based private equity firm. A&R is the largest provider of integrated dry bulk logistics for the chemical and plastics industries in North America. As is customary in such acquisitions, both parties were at pains to point out how the new arrangement will provide access to capital to expand operations; in this case, A&R is now planning to build major facilities in the ports of Charleston and Savannah to support the packaging and export of polymers.
Ownership by investment funds places a corporation somewhere between a public and a private company. On the one hand there is still a shareholder to satisfy, with a thirst for dividends and capital growth, but on the other there is not the desperation to maintain the share price by hitting quarterly targets for profits, ROI and dividend payments. Equity funds typically have an investment horizon of three to five years – although in the case of IFM Investors, it says that it is taking a longer-term approach, with no pre-determined divestiture horizon.
The oil and gas and petrochemical sectors have a tradition of private ownership in the logistics sphere, particularly in Europe, where almost all the major road and intermodal operators remain family-controlled if not still family-owned – companies such as Suttons, Den Hartogh, Hoyer, Bertschi, Kube & Kubenz and so on. That structure certainly provides long-term stability, with a financial focus on passing on a viable corporation to generations to come.
Equity investment funds generally do not take such a long-term view, and while the US midstream sector, leveraging the opportunities provided by the availability of low-cost feedstocks derived from shale oil and gas extraction to boost domestic refining and petrochemical production and open up new export streams, currently offers the sorts of dependable income and capital growth that they are seeking (especially at a time when traditionally investment routes are not paying well), they may not be keen on the sector for ever.
But as individuals we should be happy with their interest. After all, the funds that these firms are investing are, in part, the money that most of us are relying on to keep us warm and fed in our retirement. Peter Mackay
[post_title] => Financial letter from the Editor
[post_status] => publish
[comment_status] => open
[ping_status] => open
[post_name] => financial-letter-editor-2
[post_modified] => 2019-05-27 11:33:25
[post_modified_gmt] => 2019-05-27 10:33:25
[post_parent] => 0
[guid] => https://www.hcblive.com/?p=11071
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