ACQUISITIONS
Navigator Acquisition On April 11, 2017, we entered into a Membership Interest Purchase and Sale Agreement (the Acquisition Agreement) with FR Navigator Holdings LLC to acquire all of the issued and outstanding limited liability company interests in Navigator Energy Services, LLC (Navigator) for approximately $1.5 billion. We closed the Navigator Acquisition on May 4, 2017. We acquired crude oil transportation, pipeline gathering and storage assets located in the Midland Basin of West Texas that we collectively refer to as our Permian Crude System. The assets acquired are included in our pipeline segment. The condensed consolidated statements of comprehensive income include the results of operations for Navigator commencing on May 4, 2017.
We accounted for the Navigator Acquisition using the acquisition method. The following table reflects the final purchase price allocation: | | | | | | Purchase Price Allocation | | (Thousands of Dollars) | Accounts receivable | $ | 4,747 |
| Other current assets | 2,359 |
| Property, plant and equipment, net | 376,690 |
| Intangible assets (a) | 700,000 |
| Goodwill (b) | 398,024 |
| Other long-term assets, net | 2,199 |
| Current liabilities | (22,300 | ) | Purchase price allocation, net of cash acquired | $ | 1,461,719 |
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| | (a) | Intangible assets, which consist of customer contracts and relationships, are amortized on a straight-line basis over a period of 20 years. |
| | (b) | The goodwill acquired represents the expected benefit from entering new geographic areas and the anticipated opportunities to generate future cash flows from the assets acquired and potential future projects. |
The unaudited pro forma information for the three months ended March 31, 2017 presented below combines the historical financial information for Navigator and the Partnership for that period. The information assumes we completed the Navigator Acquisition on January 1, 2017 and the following: | | • | we issued approximately 14.4 million common units; |
| | • | we received a contribution from our general partner of $13.6 million to maintain its 2% interest; |
| | • | we issued 15.4 million Series B Preferred Units; |
| | • | we issued $550.0 million of 5.625% senior notes; |
| | • | additional depreciation and amortization that would have been incurred assuming the fair value adjustments to property, plant and equipment and intangible assets reflected in the purchase price allocation above; and |
| | • | we satisfied Navigator’s outstanding obligations under its revolving credit agreement. |
| | | | | | Three Months Ended March 31, 2017 | | (Thousands of Dollars, Except Per Unit Data) | Revenues | $ | 497,384 |
| Net income | $ | 42,448 |
| | | Basic net income per common unit | $ | 0.19 |
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The pro forma information for the three months ended March 31, 2017 does not include transaction costs of approximately $14.0 million, which were directly attributable to the Navigator Acquisition and paid in the second quarter of 2017. The pro forma information is unaudited and is not necessarily indicative of the results of operations that would have resulted had the Navigator Acquisition occurred on January 1, 2017 or that may result in the future. |