Two Arclight companies agree to $2bn midstream merger

American Midstream is buying 100% of JP Energy’s stock to create a combined midstream company focusing on North America’s largest oil fields.

Two midstream oil companies, American Midstream Partners and JP Energy Partners, have agreed to a merger agreement that creates a $2 billion master limited partnership (MLP).

American Midstream is acquiring 100 percent of JP Energy in an all-stock transaction that creates a combined midstream platform. JP Energy’s stockholders will receive $8.63 per common unit, a 14.5 percent premium from when the stock closed on Friday.

The new company will be headquartered in Houston and will operate in North America’s largest oil basins including the Permian, Eagle Ford and Bakken. American Midstream chief executive Lynn Bourdon will head the new company.

Private equity firm Arclight Capital Partners, which has stakes in both companies, is combining the general partners of American Midstream and JP Energy. Arclight had a 15.6 percent stake in American Midstream and a 19.8 percent stake in JP Energy as of June 30, according to Thomson Reuters.

A statement on the transaction said the new partnership will give stakeholders improved scale and financial flexibility to invest in growth projects, third-party acquisitions and potential asset drop downs from Arclight.

“The merger elevates and reshapes our two businesses into a new platform that we expect will allow for higher growth, new business opportunities and a stronger financial position than either company could achieve separately,” American Midstream Bourdon said in a statement.

After the transaction closes later this year or in early 2017, the companied partnership will own and operate more than 3,100 miles of gathering and transportation pipeline. It will operate six processing plants and hold a 13.9 percent interest in an offshore floating production in the deep water Gulf of Mexico. It will also be the third largest propane business in the US.

Bank of America Merrill Lynch acted as financial advisor to American Midstream, and BMO Capital Markets acted in that role for JP Energy.