What happened

Units of Buckeye Partners (NYSE:BPL) are skyrocketing today, up more than 28% as of 10 a.m. EDT, after the master limited partnership (MLP) agreed to a buyout offer. The company also reported its first-quarter results.

So what

Buckeye Partners agreed to be acquired by the IFM Global Infrastructure Fund for $41.50 per unit in cash. The deal values the company at $10.3 billion. The all-cash transaction represents a premium of 27.5% for the MLP's units. Buckeye expects the deal to close during the fourth quarter.

Two people shaking hands with pipelines in the background.

Image source: Getty Images.

This transaction follows Buckeye's strategic review, which it completed last November. The company took several actions at the time to shore up its financial profile, including slashing its distribution and selling several assets. The subsequent improvement made it a much more attractive acquisition candidate.

Those asset sales, however, are having a near-term impact on Buckeye's earnings. Distributable cash flow, for example, declined nearly 15% year over year during the first quarter due to the lost income from those businesses. The company does expect earnings to improve in the coming years as it completes expansion projects, which include a new oil export terminal in Texas.

Now what

Buckeye Partners has worked hard to turn around its financial profile, which was under pressure after it overpaid for an acquisition a few years ago. Those efforts, as well as its investments in high-return expansions like the oil export facility, are starting to pay off. That led IFM Global to make it an offer it couldn't refuse.

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