Western Refining (NYSE:WNR) announced today that it has signed and closed a deal to acquire the general partner of Northern Tier Energy (UNKNOWN:NTI.DL) for $775 million. Western is purchasing the stake, which includes 35,622,200 limited partner units, from the privately held ACON Investments and TPG.
It is important to note that as a variable rate master limited partnership, Northern Tier does not pay incentive distribution rights to its general partner. Western Refining will, however, receive distributions on its 38.7% limited partner interest, beginning with the fourth-quarter payout.
The deal boosts Western's refining capacity to 242,500 barrels per day, and improves the refiner's access to Bakken and Canadian crude supplies. The move also expands Western's distribution footprint to include the upper Midwest, where Northern Tier's assets are located. Northern Tier's retail assets include more than 200 convenience stores, which should integrate nicely with Western Refining's own slate of 200 stores.
Western Refining financed the deal with $550 million in debt, paying the remainder, including fees and expenses, with $245 million in cash. The partnership's units were trading up more than 8% on the news by mid-morning.
Hank Kuchta, CEO of Northern Tier Energy, said in a statement that, "We are excited to welcome Western Refining as a new strategic partner and investor that is committed, as much as we are, to Northern Tier Energy's long-term success. We thank ACON and TPG for their support over the past three years ... "