Flint Hills Resources completes $2.1 billion PetroLogistics acquisition

07/16/2014 8:46 AM

07/17/2014 7:23 AM

Officials from Flint Hills Resources said Wednesday that the Wichita-based company has closed on its $2.1 billion acquisition of PetroLogistics – Flint Hills’ largest-ever acquisition.

The wholly owned subsidiary of Koch Industries announced the all-cash deal with PetroLogistics in May. The acquisition includes a propylene plant near the Houston Ship Channel that produces about 1.45 billion pounds annually of the petrochemical. The propylene that the PetroLogistics plant produces is used in the production of a wide variety of plastics, such as food packaging and clothing.

“It’s the largest plant of its kind in the world,” said Tony Sementelli, Flint Hills Resources executive vice president and chief financial officer.

PetroLogistics, a publicly traded company, has about 110 employees.

“It fits our vision … has synergies with our existing assets, synergies with our pipeline system we use today and it has very capable people coming with it,” said Brad Razook, Flint Hills Resources president and CEO. “It really fits well.”

According to information from Koch, all of PetroLogistics’ outstanding common units were converted into the right to receive $14 per common unit in cash, except for those owned by Lindsay Goldberg LLC, York Capital Management, MLP GP’s executive chairman and its president and chief executive officer, which were acquired for $12 per common unit in cash. Additionally, all holders of record of common units on July 15 will receive a special, one-time distribution of 40 cents per common unit.

With the acquisition, PetroLogistics will no longer be a publicly traded company.

It also marks another growth spurt for Flint Hills Resources, which over the last decade has diversified and expanded its footprint.

Flint Hills Resources’ businesses now include crude oil supply, refining and marketing for products such as diesel, gasoline, jet fuel and asphalt; chemicals and polymers; and biofuels, including six ethanol plants in Iowa and Nebraska.

Razook said since 2002 Flint Hills Resources has expanded significantly. Between 2002 and now, the company has grown from 2,045 employees – including 348 in Wichita – to 4,723 employees, including 606 in Wichita.

In that same time frame, Flint Hills Resources has spent $10.7 billion in acquisitions and upgrades to its facilities: $5 billion in acquisitions and $5.7 billion in facilities upgrades, Razook said.

The company’s move beyond crude oil supply, refining and marketing was part of a new “vision” Flint Hills Resources implemented starting in 2002, and which it has tweaked several times since.

Instead of looking only at acquisitions or chances to innovate within a certain industry sector, Flint Hills Resources officials are charged with looking at their company’s core competencies – in areas such as process optimization, risk management and cost control – to see if they can be applied elsewhere.

“We’re trying not to limit ourselves, but think more about our capabilities,” Razook said.

“We’re really excited about what we think we can do with this (acquisition) and hopefully, spur additional growth,” he added.

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