Natural Resource Partners L.P. reported that it has acquired (1) a 48.51% general partner interest in OCI Wyoming L.P. and (2) 20% of the common shares and all of the preferred shares of OCI Wyoming Co. from subsidiaries of Anadarko Petroleum Corporation. NRP paid a net $292.5 million for the interests, after normal closing adjustments to the purchase price of $310 million.
The agreement also contains an earn-out provision, which would require NRP to pay Anadarko up to $50 million, on a net present value basis, over a three-year period if OCI Wyoming L.P. achieves specified revenue targets during that period. The acquisition was funded through a $200 million term loan, the issuance of $76.5 million in equity, including a general partner contribution of $1.5 million, and $16 million in cash.
The Acquisition
OCI Wyoming is the world's fifth-largest producer of soda ash. It operates a trona ore mining operation and a soda ash refinery in Green River, Wyoming. Trona ore is a naturally occurring form of soda ash, which is used worldwide in manufacturing a variety of consumer products, primarily including glass, chemicals, soap and paper. World demand for soda ash has been growing for the past three decades, driven particularly by Asia.
In addition to distributions on its 48.51% partnership interest in OCI Wyoming L.P., NRP expects to receive an annual preferential distribution of $4.7 million on its preferred shares in OCI Wyoming Co. NRP expects the transaction to be accretive to cash flow in 2013 in a range of $0.18 to $0.22 per unit.
The day-to-day operations in Green River are managed by employees of OCI Chemical Corporation, a subsidiary of OCI Company, Ltd, a Korean-based global chemical company. NRP will appoint three people to a 7-member committee responsible for governing the partnership.
"We are looking forward to a great partnership with OCI," said Nick Carter, President and COO of Natural Resource Partners. "With the acquisition of this interest in trona, we have taken another significant step in diversifying our revenues. At the time of our initial public offering, we had a vision of owning numerous types of natural resource properties. In the past six years we have made a concerted effort to increase our exposure to a variety of minerals including aggregates/industrial minerals and oil and gas. In addition, over that same period we have diversified our coal assets to include large reserve blocks and infrastructure assets in Illinois, as well as metallurgical coal reserves in Appalachia, Collectively, we anticipate that these assets will provide stability and diversity for our unitholders."
Term Loan
The three year $200 million senior unsecured term loan was issued by ten banks, seven of which participate in NRP's credit facility. Citigroup Global Markets, Inc., Wells Fargo Securities, LLC and BBVA Compass served as joint lead arrangers and joint bookrunners on the transaction. The loan requires modest repayments of $10 million in January 2014 and $20 million in January 2015, with the remainder due upon maturity in January 2016.
Equity
NRP issued $75 million in equity to several affiliates of NRP's general partner, including Corbin J. Robertson, Jr, Chairman and CEO of Natural Resource Partners, and members of his family; Chris Cline; S. Reed Morian; and W.W. Scott, Jr. The 3,784,572 common units issued at $19.8173 reflect a 4.5% discount to the volume-weighted average closing price of NRP's units over the prior 15 trading days. NRP (GP) L.P., the general partner of Natural Resource Partners L.P., also contributed $1.5 million to maintain its 2% interest in the partnership.
Following the acquisition and associated financing, NRP has approximately $285 million in liquidity, consisting of $133 million in cash (at December 31, 2012 pro-forma for the transaction) and $152 million available under its credit facility.
Natural Resource Partners L.P. is a master limited partnership headquartered in Houston, TX, with its operations headquarters in Huntington, WV. NRP is principally engaged in the business of owning natural resource assets. NRP primarily owns coal, aggregate and oil and gas reserves across the United States that generate royalty income for the partnership.
