Arc Logistics, Zenith Energy Merger Moves A Step Closer

Arc Logistics Partners LP (NYSE:ARCX) , with the help of its initial limited partner Lightfoot Capital Partners, LP, entered into a definitive merger agreement with Zenith Energy U.S., L.P. Per the deal, Zenith Energy will acquire Arc Logistics, an oil and gas midstream firm.

A conflicts committee was set up by the board of directors of Arc Logistics with independent directors to evaluate, review and negotiate the merger agreement. The merger was unanimously approved by the committee, which found the agreement aligned with the best interest of Arc Logistics’ unitholders. The committee also recommended the board and the holders of common units to approve the merger.

Deal Details

Per the terms of the agreement, the acquirer will receive all outstanding public common units and also the common units held by Lightfoot and other private interests held by Arc Logistics’ sponsors.

The common unit holders except Lightfoot will receive $16.50 for every unit in cash from Zenith. This price includes a 15% premium to the partnership’s Aug 28, 2017 price. Lightfoot Capital will get $14.50 cash for every common unit of its 5.2 million units in possessions.

The transaction is expected to be closed between the fourth quarter of 2017 and the first quarter of 2018.

Closing Conditions

The deal is subject to approval from the majority of Arc Logistics' outstanding common unit holders. The expiration of the waiting period per the Hart-Scott-Rodino Antitrust Improvements Act of 1976 will be considered while deciding the partnership's fate. Lightfoot, which holds 26.8% of the outstanding units, has already approved the deal.

In terms of assets, the deal requires the closing of Zenith's buying certain interests in Arc Terminals Joliet Holdings from the EFS Midstream Holdings. The assets include a crude oil pipeline in Joliet, IL and a crude oil unloading facility. It also includes 5.5% interest in Gulf LNG Holdings possessing a liquefied natural gas regasification and storage facility in Pascagoula, MS.

About the Partnership

Arc Logistics is principally engaged in terminalling, storage, throughput and trans-loading of crude oil and petroleum products. It owns, operates, develops and acquires a portfolio of complementary energy logistics assets. The partnership is based in New York.

The company’s four-quarter average earnings surprise was negative 28.8%. It missed the Zacks Consensus Estimate in second-quarter 2017 by 3 cents per share.

Price Performance

Arc Logistics has gained 3.2% year to date compared with 0.1% growth of its industry.

Zacks Rank and Stocks to Consider

Arc Logistics carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the oil and energy sector include Range Resources Corporation (NYSE:RRC) , Subsea 7 SA (OTC:SUBCY) and TransCanada Corporation (TO:TRP) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Range Resources’ sales for 2017 are expected to increase 122.8% year over year. The company delivered a four-quarter average positive earnings surprise of 51.8%.

Subsea’s sales for 2017 are expected to increase 11.6% year over year. The company delivered a positive average earnings surprise of 83.8% in the last four quarters.

TransCanada’s sales for 2017 are expected to increase 0.3% year over year. It delivered a positive earnings surprise of 12% in the second quarter of 2017.

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