Sprague Resources’ (SRLP) operating subsidiary Sprague Operating Resources has signed a definitive agreement to acquire the Lawrence and Inwood refined product terminal assets of Carbo Industries and Carbo Realty.
Under the agreement, Sprague will pay $70m as consideration for this acquisition, along with additional payments for inventory and other customary items.
The consideration includes nearly $30m of SRLP issued shares and $10m in cash, both to be paid at closing.
The remaining amount would in paid in cash over a period of ten years.
Sprague president and CEO David Glendon said: “The Carbo facilities have long been an integral component of our distribution network and we’re thrilled to convert our position from tenant to owner in this critical location, further solidifying our status as one of New York’s premier refined products terminal operators and marketers.
“I’m also pleased that Cliff Hochhauser, who has been central to Carbo’s success, will be joining Sprague and continuing to lead operations at these facilities.”
The Carbo terminals have a combined storage capacity of 157,000 barrels.
These terminals are primarily supplied through pipeline, but products can also be delivered via barge and truck.
The terminals are located strategically near the major transportation networks, enabling the company to serve major branded petrol marketers, as well as unbranded petrol / distillate marketers in New York City and Long Island.
Furthermore, the terminals can become a key asset for the company to serve New York’s governmental / municipal transportation fuel users and heating oil retailers.
The Carbo transaction is expected to be accretive to distributable cash flow and generate nearly $8m to $10m of adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) per year.
Glendon added: “While the Carbo terminals’ total combined storage capacity will rank among the smallest in our network, their expected combined annual throughput will be higher than any single Sprague-owned facility.
“We look forward to this acquisition nearly tripling our gasoline throughput business, expanding the portfolio of branded gasoline suppliers we serve, and diversifying Sprague’s seasonal cash flows to mitigate the impact of weather on our operating results.”
Sprague Resources has planned to fund this acquisition by borrowings from its senior secured credit facility.
The transaction is expected to close in the second quarter of this year.