GasLog Partners LP (NYSE:GLOP) (GasLog Partners or the Partnership) and GasLog Ltd. (NYSE:GLOG) (GasLog) announced Thursday (Oct 27) that they have entered into an agreement for the Partnership to purchase from GasLog 100% of the shares in the entity that owns and charters GasLog Seattle (the Acquisition).
The aggregate purchase price for the Acquisition will be $189 million, which includes $1 million for positive net working capital balances to be transferred with the vessel. GasLog Partners expects to finance the acquisition with cash on hand, including proceeds from its recent equity offering, and the assumption of GasLog Seattle's existing debt. The Acquisition is expected to close in the fourth quarter of 2016 and is subject to satisfaction of certain closing conditions.
LNG Carrier GasLog Seattle
GasLog Seattle is a 155,000 cubic meter tri-fuel diesel electric liquefied natural gas (LNG) carrier built in 2013 and operated by GasLog since delivery. The vessel is currently on a multi-year time charter with a wholly owned subsidiary of Royal Dutch Shell plc (Shell) through December 2020. Shell has two consecutive 5-year extension options, which if exercised, would extend the charter for a period of either 5 or 10 years.
The Partnership believes the Acquisition will be immediately accretive to unitholder distributions and consistent with its strategy to grow cash distributions through dropdown and third-party acquisitions. GasLog Partners estimates that, assuming full utilization, GasLog Seattle will add approximately $20 million to EBITDA(1) and $10 million to distributable cash flow(1) in the first 12 months after closing.
Accordingly, the Acquisition purchase price represents a multiple of approximately 9.4x estimated EBITDA. The Board of Directors of GasLog, the Board of Directors of GasLog Partners (the Board), and the Conflicts Committee of the Board have approved the Acquisition.
Following the completion of the Acquisition, the Partnership's management intends to recommend to the Board an approximately 5% annualized increase in the Partnership's cash distribution per unit. Any such increase would be conditioned upon, among other things, the closing of the Acquisition, the approval of such increase by the Board, and the absence of any material adverse developments or potentially attractive opportunities that would make such an increase inadvisable.
Andy Orekar, Chief Executive Officer of GasLog Partners, stated, "I am very pleased to announce the Partnership's third accretive dropdown transaction. Acquiring this strategically attractive vessel and its multi-year charter to Shell highlights GasLog Partners' differentiated business model, which provides cash flow stability with growth through acquisitions. The Acquisition extends our average remaining charter duration and is consistent with our track record of delivering a 10-15% CAGR from IPO in cash distributions.
After closing the Acquisition, GasLog Partners will have a dropdown pipeline of thirteen vessels and a strong balance sheet, providing a highly visible path to future distribution increases."
Paul Wogan, Chief Executive Officer of GasLog, stated, "I am delighted that, despite challenging market conditions, we continue to execute on our strategy of dropping vessels into GasLog Partners and recycling the capital to GasLog. This transaction continues to strengthen our balance sheet and provides further funding for future profitable growth. We also benefit from increases in GasLog Partners' distribution through our unit ownership and incentive distribution rights, which should continue to enhance our valuation."
(1)EBITDA and distributable cash flow are non-GAAP financial measures. Please refer to Exhibit I for guidance on the underlying assumptions used to derive EBITDA and distributable cash flow.
Source: GasLog Partners