Natural Resource Partners L.P. (NRP - Analyst Report) acquired a 48.51% general partner stake in OCI Wyoming L.P.’s Trona operations located in the Green River region of Wyoming. The deal also includes acquiring 20% of the common shares and all other preferred shares of OCI Wyoming from subsidiaries of Anadarko Petroleum Corporation (APC - Analyst Report).
OCI Wyoming is a premier eco-friendly chemical products manufacturer in the U.S. The company also operates a soda ash facility in the Green River province. With demand for soda ash rising in Asia, Natural Resources’ stake buyout is a key strategic move for the partnership.
Natural Resource Partners shelled out a net $292.5 million for the acquisition after taking into account normal closing adjustments. The buyout was financed via a $200 million senior unsecured term loan issued by ten financial institutions, equity offerings of $75 million and $16 million in cash and a $1.5 million that was pitched in by the general partner ("GP") of Natural Resource Partners L.P. The gross purchase price was $310 million.
The arrangement also consists of an earn-out provision which entails Natural Resource Partners to pay a sum, on a net present value basis, of $50 million to Anadarko in the event OCI Wyoming reaches precise revenue targets in the period of three years.
Apart from distributions from its 48.51% interest in OCI Wyoming, the partnership will receive preferred distribution of about $4.7 million on an annual basis from its preferred units in OCI Wyoming. This is expected to be accretive to Natural Resources Partners' cash flow for 2013 in the range 18 cents per unit to 22 cents per unit.
Natural Resource Partners has been busy acquiring a string of unconventional assets. These include the purchase of frac sand reserves in Wisconsin and a majority stake in the liquids-rich Marcellus formations. We believe the partnership's diversification of the asset portfolio will render a stable top line in the future.
Moreover, the partnership is expected to benefit from a rebound in the coal market in the near term, especially in metallurgical coal, owing to visible growth signs in China. Coal exporters like Natural Resource Partners will stand to gain from increasing demand for power in China and other emerging economies. Currently, Natural Resource Partners carries a Zacks Rank #1 (Strong Buy).
Other coal operators expected to benefit from the coal market upswing are Walter Energy Inc. (WLT - Analyst Report) and Alpha Natural Resources Inc. (ANR - Snapshot Report).
Headquartered in Houston Texas, the partnership together with its subsidiaries, engages in the ownership and management of coal properties in Appalachia, the Illinois Basin, and the western United States, as well as lignite reserves in the Gulf Coast region.