8-KLeadership ChangesAcquisitions & DispositionsMaterial Agreements+5

ENTERPRISE PRODUCTS PARTNERS L.P. 8-K Report, Material Agreement (Nov 23, 2010)

Filed November 23, 2010For Securities:EPDEPDU

Summary

Enterprise Products Partners L.P. (EPD) filed an 8-K on November 23, 2010, detailing the completion of a significant merger with Enterprise GP Holdings L.P. (Holdings). This transaction involved the merger of Holdings into EPD's subsidiary, MergerCo, followed by a merger of EPD's general partner, Products GP, into Holdings, which then merged into MergerCo. The outcome is that EPD now wholly owns MergerCo, and Enterprise Products Holdings LLC (formerly EPE Holdings) has become the non-economic general partner of EPD. This merger simplifies the partnership structure and consolidates operations under a single entity. A key financial implication for unitholders is the Distribution Waiver Agreement. Under this agreement, a significant unitholder (EPD Unitholder) has agreed to waive its rights to quarterly distributions of 'Available Cash' for a specified number of units over a five-year period, beginning in 2011 and gradually decreasing through 2015. This waiver will reduce the total number of units entitled to distributions in the near term, potentially increasing the per-unit distribution for other common unitholders, assuming available cash is distributed. The partnership also announced the cancellation of incentive distribution rights previously held by its general partner, which will no longer receive a portion of current or increased distributions of available cash.

Key Highlights

  • 1Completion of a significant merger between Enterprise Products Partners L.P. (EPD) and Enterprise GP Holdings L.P. (Holdings), simplifying the corporate structure.
  • 2Enterprise Products Holdings LLC (formerly EPE Holdings) is now the sole general partner of EPD, with a non-economic interest.
  • 3Cancellation of incentive distribution rights (IDRs) previously held by the general partner, meaning the general partner will no longer receive a share of distributions based on IDRs.
  • 4A key unitholder has agreed to waive rights to quarterly distributions for a specific number of common units over a five-year period (2011-2015), potentially benefiting other unitholders.
  • 5The number of units subject to the distribution waiver decreases each year from 30.61 million in 2011 to 17.69 million in 2015.
  • 6Management structure of the new general partner, EPE Holdings (renamed Enterprise Products Holdings LLC), has been updated with new directors and officers appointed.
  • 7Audited financial statements for Holdings for the years 2007-2009 are incorporated by reference, along with risk factors related to the MLP merger.

Frequently Asked Questions

The primary purpose of the merger was to simplify Enterprise Products Partners L.P.'s corporate structure by consolidating operations under a single entity and making Enterprise Products Holdings LLC the sole general partner with a non-economic interest. This simplifies governance and financial reporting.

The Distribution Waiver Agreement means that a specific block of units will not receive quarterly distributions for a period of five years. This effectively reduces the total number of units receiving distributions in the short term. Assuming the partnership distributes available cash, this could lead to a higher per-unit distribution for the remaining common unitholders. The waiver amount decreases each year through 2015.

Incentive Distribution Rights (IDRs) are typically rights held by the general partner of a master limited partnership (MLP) that allow it to receive an increasing share of cash distributions as the partnership's distributable cash grows. The cancellation of these rights means the general partner will no longer receive this escalating share of distributions. This typically benefits the limited partners (unitholders) by allowing them to receive a larger portion of the available cash, especially as cash distributions increase.

Following the merger, the board of directors of the successor General Partner, EPE Holdings (renamed Enterprise Products Holdings LLC), includes individuals like Randa Duncan Williams (Chairman), Dr. Ralph S. Cunningham, Michael A. Creel (President and CEO), and A. James Teague (Executive Vice President and COO), among others. The filing provides detailed biographies for these and other key officers.