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Buckeye Partners (BPL) Divests 50% Stake in VTTI for $975M

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Buckeye Partners, L.P. (BPL - Free Report) recently announced that it has completed the previously announced sale of its 50% equity interest in VTTI B.V. to Vitol Investment Partnership II Ltd and IFM Investors, for a total cash of $975 million. This divestment came in line with the partnership’s recently undertaken strategic review.

The partnership is expected to use the sale proceeds to reduce its leverage, with an aim to maintain an investment grade credit rating. These assets sale will generate a gain of $350 million, which the partnership can be expected to have recognized in the fourth quarter of 2018.

Reasons Behind the Divestment

Last year, the company made investment in VTTI in order to gain access to international terminal platform for achieving growth in key hubs of emerging markets. However, due to deterioration in the capital markets the international investment turned out to be less profitable to the partnership compared to domestic assets.

This led the partnership to execute the aforementioned divestiture, to relocate available capital to its growth initiatives across the domestic assets, particularly the opportunities along the Gulf Coast.

Buckeye’s Strategic Review

Buckeye’s strategic review aims at reallocating its capital resource to growth opportunities with higher returns across its remaining assets, after eliminating those which are not performing very well.  We believe, following this strategy, the partnership divested its equity stake in VTTI. The partnership is also taking other initiatives, under this strategy.

To this end, in December 2018, the partnership closed the planned sale of a package of domestic pipeline and terminal assets for $450 million to a subsidiary of InstarAGF Asset Management Inc. We expect the partnership to utilize the money generated from this transaction in reducing its debt.

Price Movement

In the past month, units of Buckeye have outperformed its industry. The units have rallied 24%, greater than the industry’s rise of 18.6%.



Zacks Rank & Key Picks

Buckeye has a Zacks Rank #4 (Sell).

Some better-ranked stocks from the same sector are Canadian Solar Inc. (CSIQ - Free Report) , Phillips 66 Partners LP (PSXP - Free Report) and The Williams Companies, Inc. (WMB - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Canadian Solar delivered an earnings surprise of 49.66% in the last reported quarter. The Zacks Consensus Estimate for 2019 earnings has moved 7.6% north to $2.40 over the past 60 days.

Phillips 66 Partners pulled off a positive surprise of 6.03% in the trailing reported quarter. The Zacks Consensus Estimate for 2019 earnings has been revised 3.8% upward to $4.07 over the past 60 days.

Williams came up with a beat of 7.52% in the previous reported quarter. The Zacks Consensus Estimate for 2019 earnings has been inched 1.1% up to 95 cents over the past 60 days.

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