New York-based Macquarie Infrastructure Company (MIC) has agreed to buy the 50 percent it does not already own in International Matex Tank Terminals (IMTT) from the Coleman family, which founded the company, for $910 million in cash and $115 million in stock according to a statement.
The infrastructure investment firm, a wholly-owned subsidiary of Australian asset manager Macquarie Group, acquired its initial 50 percent stake in the marine terminal operator in May 2006.
Since then, IMTT’s EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) increased from approximately $67 million in 2005 to $279.6 million for the trailing 12-month period ending March 31, 2014, MIC said.
“We’re acquiring a business that we know from our involvement with it over the past eight years and, more importantly, a business with a strong foundation built over many years of stewardship on the part of the Coleman family,” MIC’s chief executive James Hooke said, referring to the motivation behind the latest acquisition.
MIC intends to grow the company by investing in new projects but it also plans to implement expense management strategies at IMTT, similar to those the company has already adopted in its other businesses.
“We believe that there are a number of opportunities at IMTT to implement better controls and processes, particularly as they relate to expense management and maintenance capital expenditures,” Hooke said.
The issue of IMTT’s maintenance capital expenditures and expense management has been raised before. In February, when MIC reported its full-year 2013 financial results, Hooke noted that “…cost control at IMTT was very disappointing in December, in our view, and provided further evidence in support of our belief that we need to change processes and upgrade management at IMTT.”
In its current statement MIC said it did not intend to make significant personnel changes but would fill vacancies resulting from retirements.
Expected retirements include that of Thomas Coleman, current chief executive; James Coleman, chairman; and James O. Coleman, head of government relations. All three executives are members of the founding family.
Hooke will initially act as IMTT’s chief executive while continuing to head MIC. IMTT’s current asset director James May will assume the position of chief financial officer and will be assisted by an additional Macquarie secondee who will head up an expanded financial planning and analysis function at IMTT, according to the statement. Both Hooke and May have served on IMTT’s board for the past five years.
IMTT’s current chief financial officer John Siragusa will assume the role of chief banking officer and Richard Courtney will continue in his role as IMTT’s president and chief operating officer. Courtney and Siragusa will report to Hooke.
In addition to improving operations and further developing IMTT, the acquisition will also aim to benefit MIC’s shareholders by eliminating a double layer of taxation.
“As a stand-alone entity, IMTT will no longer pay federal taxes and MIC will no longer pay tax on the portion of distributions received from IMTT in excess of the federal Dividends Received Deduction amount,” MIC said in the statement.
Under the terms of the agreement, MIC cannot make any structural changes at IMTT, such as converting the business into a master limited partnership, for a period of one year following the closing of the transaction, which is expected – subject to certain conditions and regulatory approvals – by the end of July.
In addition to the signing of the acquisition agreement, the MIC board also authorised an increase in the company’s quarterly cash dividend of 1.3 percent compared with the dividend paid for the first quarter of 2014. The dividend of $0.95 per share will be payable on August 14. MIC management expects the board will review the dividend again once the transaction has been completed and integrated.
IMTT is one of the largest independent bulk liquid terminals businesses in the US. It owns and operates 10 marine terminals in the US – the largest ones located in New York Harbour and on the Mississippi River – and is the part owner and operator of two terminals in Canada. The terminals handle a wide variety of petroleum grades, chemicals and vegetable and animal oils.
Based in New York, MIC owns, operates and invests in a diversified group of infrastructure businesses including a gas processing and distribution business, Hawaii Gas, Direct Energy, and MIC Solar. MIC also owns and operates Atlantic Aviation, an airport services business.