HOUSTON, Jan. 02, 2018 (GLOBE NEWSWIRE) -- Archrock, Inc. (NYSE:AROC) and Archrock Partners, L.P. (NASDAQ:APLP) announced that they have entered into a definitive merger agreement under which Archrock will acquire all of the outstanding common units of Archrock Partners it does not already own for Archrock common stock valued at approximately $607 million, based on the most recent closing price of Archrock common stock.
Under the merger agreement, each outstanding common unit of Archrock Partners that Archrock does not already own will be converted into 1.400 shares of Archrock common stock, representing a 23.4 percent premium to the Archrock Partners closing price on December 29, 2017; and a 23.9 percent premium to Archrock Partners volume-weighted average trading price during the ten trading days ended December 29, 2017.
“We believe the combination of Archrock and Archrock Partners will enhance our cash available for dividend coverage, improve our credit profile, simplify our capital structure, and lower our cost of capital. Additionally, our increased retained cash flow will better position us to continue to invest in our robust opportunity set of growth projects and significantly reduce our need for equity capital,” said Brad Childers, President and Chief Executive Officer. “We believe this transaction is attractive for our stockholders and unitholders, as it will improve our platform to capture the next leg of growth in the U.S. natural gas compression market.”
The transaction is expected to be immediately accretive to Archrock, and the combined company is expected to have a cash available for dividend coverage ratio above 2.00x through 2020. Management intends to recommend to the Archrock board of directors a 10 percent increase in the first full quarterly dividend following the completion of the transaction and expects a 10 to 15 percent annual dividend growth rate through 2020.
Following the completion of the transaction, Archrock is expected to have an approximate $2.8 billion enterprise value and will continue to be the largest outsourced provider of natural gas compression services in the United States. Stockholders of Archrock and unitholders of Archrock Partners are expected to benefit from the larger size of the combined company, improved equity trading liquidity, and a lower cost of funding for future growth. Following the completion of the transaction, Archrock does not expect to pay cash federal income taxes through at least 2023.
Additional Transaction Terms and Details
Under the terms of the merger agreement, Archrock will acquire all of the approximately 41.3 million outstanding units of Archrock Partners it does not already own at a fixed exchange ratio of 1.400 Archrock common shares for each publicly held common unit of Archrock Partners. Archrock Partners common units will no longer be publicly traded after the transaction. In aggregate, Archrock will issue approximately 57.8 million shares in connection with the proposed transaction, representing approximately 44.9 percent of the total shares outstanding of the pro forma combined entity.