8-KOther Events

ENTERPRISE PRODUCTS PARTNERS L.P. 8-K Report, Corporate Update (Feb 26, 2020)

Filed February 26, 2020For Securities:EPDEPDU

Summary

Enterprise Products Partners L.P. (EPD) announced on February 25, 2020, that Marquard & Bahls AG (M&B) has exercised its Liquidity Option to sell its stake in Oiltanking Holdings Americas, Inc. (OTA) back to EPD. This option stems from EPD's 2014 acquisition of a controlling interest in Oiltanking Partners, L.P., where EPD issued approximately 54.8 million common units to OTA as part of the transaction. The exercise of this option will result in EPD acquiring OTA's capital stock, and importantly, EPD expects to issue approximately 54.8 million newly issued EPD common units to M&B as consideration, rather than cash. This transaction is structured to effectively reacquire the units EPD previously issued to OTA, with the settlement anticipated for March 5, 2020. The primary financial impact will be the exchange of the previously recognized Liquidity Option liability for OTA's deferred income tax liabilities.

Key Highlights

  • 1Marquard & Bahls AG (M&B) has exercised its "Liquidity Option" to sell its interest in Oiltanking Holdings Americas, Inc. (OTA) back to EPD.
  • 2The exercise is a follow-on to EPD's 2014 acquisition of a controlling interest in Oiltanking Partners, L.P., which involved issuing EPD common units to OTA.
  • 3EPD expects to settle the transaction by issuing approximately 54.8 million newly issued EPD common units to M&B, rather than cash.
  • 4The settlement is scheduled for March 5, 2020.
  • 5Upon settlement, EPD will effectively reacquire the 54.8 million EPD common units previously held by OTA and assume OTA's future income tax obligations related to these units and existing deferred tax liabilities.
  • 6The transaction will be accounted for as the purchase of treasury units and the assumption of related deferred income taxes.
  • 7The newly issued EPD common units will be considered "restricted securities" and M&B will have rights to request registration statements for resale.

Frequently Asked Questions

The Liquidity Option was an agreement entered into in 2014 when EPD acquired a portion of Oiltanking. It granted M&B (the parent of the seller) the right to sell OTA's capital stock back to EPD within a 90-day period starting February 1, 2020. M&B has exercised this option on February 25, 2020.

EPD anticipates settling the transaction by issuing approximately 54.8 million newly issued EPD common units to M&B. This is effectively a reacquisition of the units EPD originally issued in the 2014 transaction. While cash is an option, EPD currently expects to issue units.

The primary financial impact is the replacement of the estimated $509.6 million Liquidity Option liability (as of December 31, 2019) with OTA's deferred income tax liabilities. EPD will also assume future income tax obligations associated with owning the EPD units. The partnership's capital balance for common units will increase by the market value of the issued units. If only units are issued, the total number of outstanding units will not increase due to reclassification to treasury units.

If EPD settles the transaction solely by issuing new common units, the total number of outstanding EPD common units is not expected to increase. The 54.8 million newly issued units would be offset by the reclassification of the 54.8 million EPD units held by OTA into treasury units.