NGL Energy Partners LP, the propane gas supplier, announced it would purchase Gavilon LLC, a pipeline company. Gavilon is partly owned by Soros Fund Management and the price tag on the sale is USD890 million.
NGL is in the business of selling propane gas to customers as well as provide storage services to others,. The goal of the purchase is to expand its terminal business, which is a midstream business that supplies propane to third party trucks after delivery from pipelines or wholesale truckers.
Gavilon on the other hand operates an integrated oil storage, terminal and pipeline facility in the states of Oklahoma, Texas and Louisiana. It also operates a complementary oil and refined products supply and logistics business.
The purchase price is 7.5 times the estimated run-rate earnings of Gavilon before interest, taxes, depreciation and amortization for 2014 or EBITDA. The said computation also includes working capital of about USD200 million.
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