Tallgrass Energy Buys Addl. Stake In Pony Express Pipeline; Hikes Distributions

(RTTNews) - Tallgrass Energy Partners, LP (TEP) said it is acquiring an additional 31.3 percent stake in Tallgrass Pony Express Pipeline, LLC for cash consideration of $475 million and 6.518 million TEP common units issued to Tallgrass Development.

Based on TEP's December 31st closing price of $41.21, the total consideration of about $743.6 million represents a multiple of about 9 times incremental cash flow to TEP as a result of the acquisition. The acquisition increases TEP's membership interest in Pony Express to 98 percent.

As part of the transaction, Tallgrass Development is granting TEP an 18 month call option to repurchase the newly issued 6.518 million common units at a price of $42.50. Thus, the acquisition could become more accretive to TEP if it issues equity for net cash proceeds in excess of $42.50 per common unit and exercises its option.

In a separate statement, Tallgrass Energy Partners and Tallgrass Energy GP, LP (TEGP) announced their quarterly distributions for the fourth quarter of 2015. The distributions will be paid on Friday, February 12, 2016, to unitholders and shareholders of record as of the close of business on Friday, January 29, 2016.

The board of directors of TEP's general partner declared a quarterly cash distribution of $0.64 per common unit for the fourth quarter of 2015, or $2.56 on an annualized basis. This represents a 32 percent increase from the year-ago quarter's distribution of $0.485 per common unit and a 6.7 percent sequential increase from the preceding third quarter 2015 distribution of $0.60 per common unit.

TEGP general partner's board declared a quarterly cash distribution of $0.173 per Class A share for the fourth quarter of 2015, or $0.692 on an annualized basis. This represents a 20.1 percent sequential increase from the preceding third-quarter distribution of $0.144 per Class A share and is its second consecutive increase since its IPO in May 2015.

Tallgrass also said it will release fourth-quarter 2015 financial results as well as 2016 financial guidance and also hold a conference call on Wednesday, February 17, 2016.