Conference Call Scheduled for Today at 7:00 a.m. PDT
LOS ANGELES--(BUSINESS WIRE)--Nov. 1, 2012--
Rentech Nitrogen Partners, L.P. (NYSE: RNF) announced today that it has
entered into a definitive agreement with Agrifos Holdings Inc. to
purchase all of the membership interests of Agrifos LLC, for an initial
purchase price of $158 million. Agrifos owns and operates a plant in
Pasadena, Texas, that produces primarily ammonium sulfate fertilizer.
The initial consideration is to consist of $138 million of cash, to be
provided through an amended credit facility, and $20 million of common
units of Rentech Nitrogen. The acquisition is expected to be accretive
to cash available for distribution per unit beginning in 2013. Rentech
Nitrogen will host a conference call today at 7:00 a.m. PDT to provide
additional details regarding the transaction.
“We are extremely pleased to announce our first acquisition, one year
after Rentech Nitrogen became a public company. Agrifos’ business is
expected to provide incremental cash flow and diversifies the products,
markets, location, and raw materials of our existing natural gas-based
nitrogen fertilizer plant in East Dubuque, Illinois,” said D. Hunt
Ramsbottom, CEO of Rentech Nitrogen GP, LLC. Mr. Ramsbottom continued,
“Not only do we expect this business to be accretive to cash available
for distribution beginning in 2013, but the facility comes with several
growth opportunities, the first of which we have included in our
financing package for this transaction. This growth at the Pasadena
plant would add to the growth in cash flow that we expect from the
expansion projects currently underway at Rentech Nitrogen’s existing
The Agrifos facility is the third largest producer of ammonium sulfate
fertilizer, or AS, in North America, and the largest producer in North
America of synthetic granulated AS. The plant’s other products include
ammonium thiosulfate fertilizer, or ATS, and sulfuric acid, or SA. The
plant uses ammonia and sulfur as raw materials to produce these
products. Product margins and seasonality of sales are generally less
variable than those of ammonia, with premium pricing received for
Agrifos’ superior quality AS product. The products are sold through
distributors to customers within the U.S. and Brazil. AS and ATS are
typically blended with other nitrogen, phosphate, potash, and potassium
fertilizers for application to a variety of crops to maximize yields and
maintain nutrient balance within crops. SA is utilized for industrial
The plant’s approximate production capacity on an annual basis is
currently 575,000 tons of ammonium sulfate; 570,000 tons of sulfuric
acid, of which 139,000 tons are available for sale and the remainder of
which is upgraded to ammonium sulfate; and 57,000 tons of ammonium
thiosulfate. AS production capacity is expected to increase to
approximately 690,000 tons per year in the first half of 2014 upon
completion of the first identified and financed growth project at the
The plant is strategically located on approximately 85 acres in
Pasadena, Texas, with 6,200 feet of frontage on the Houston Ship
Channel; 2 deep-water docks, providing access to key waterways for
international shipments, low-cost barge access to the Mississippi
waterway system, and significant supply of key raw materials. The site
has immediate access to railways serviced by BNSF and Union Pacific,
which is advantageous for distributing products west of the Mississippi
and realizing favorable transportation costs.
Other assets being acquired include solid fertilizer warehouses, an
ammonia dock and tank, and product storage facilities and tanks.
The facility and site provide a number of opportunities for organic
growth in cash flows from the acquisition.
Ammonia hedge for East Dubuque facility
As an ammonia upgrading plant, the Pasadena facility consumes
approximately the same amount of ammonia as the East Dubuque facility
sells. Agrifos purchases ammonia based on Tampa prices, which are lower
than the Corn Belt prices at which the East Dubuque facility sells
ammonia. This should allow the consolidated business to capture the
premium between Tampa and Corn Belt pricing, while reducing the
consolidated exposure to the variability in ammonia prices.
Ammonium sulfate prices have historically been more stable than have the
prices for the principal products of the East Dubuque facility. Margins
have also been more stable, as the prices for ammonium sulfate have been
correlated with those of ammonia and sulfur, the two principal inputs
for the Pasadena plant.
Diversifies crop and market concentration
Currently, Rentech Nitrogen sells products that are applied mostly to
corn. With ammonium sulfate, this crop concentration is diversified, as
AS is commonly applied to multiple crops such as soybeans, potatoes,
cotton, alfalfa and wheat. The acquisition also expands Rentech
Nitrogen’s geographic customer base, from a concentration in the
Mid-Corn Belt, to broad coverage across the U.S. and into Brazil.
Reduces single location risk
With the addition of another site, located in a different region,
Rentech Nitrogen will now have multiple plant locations, and therefore
risk associated with being a single location company will be reduced.
Reduces seasonality of sales
Rentech Nitrogen’s sales are currently weighted toward the fall and
spring application periods for corn crops in the Midwest. AS from
Agrifos’ plant is applied to multiple crops in multiple regions,
including Brazil, with application periods throughout the year, which
will reduce the seasonality of Rentech Nitrogen’s consolidated sales.
Future accretive growth opportunities
The Pasadena site provides several organic growth opportunities which
could provide growth in cash flows from the acquisition. The Partnership
has identified three potential growth projects for the near term:
Debottlenecking Project to Increase Ammonium Sulfate Production:
The Partnership plans to implement several improvements to the
production process next year which are expected to increase ammonium
sulfate production capacity by 20% at the plant, from approximately
1,750 tons per day to approximately 2,100 tons per day. This project is
expected to maximize production of the highest margin product, AS. The
Partnership expects to fund this project from the debt capacity under
the new credit facility. The additional AS production should contribute
to cash distributions in the second half of 2014.
Cogeneration Power Project:
The Partnership has identified a relatively low-risk power cogeneration
project at the plant. Currently, the sulfuric acid plant vents excess
steam. The project contemplates installing a steam turbine which could
use this excess steam to produce baseload power. Some of the power could
be used internally, reducing electricity expenses, and the remaining
power could be exported and sold in the deregulated Texas power market,
creating an additional revenue stream. The new debt facility will have
an accordion feature, which the Partnership could utilize, subject to
new lending commitments, to fund this project.
Terminalling and Other Projects:
The site also provides other opportunities for growth, such as
terminalling of fertilizer or other products using existing on-site
storage and deep water docks.
The initial purchase price of $158 million will be paid as follows: $138
million in cash financed by the new debt facility and $20 million in
Rentech Nitrogen common units. The acquisition price equates to 6.3x
2013 forecasted EBITDA for the plant’s operations. Rentech Nitrogen
expects the Pasadena facility to generate approximately $20 million in
operating income and approximately $25 million in EBITDA in 2013,
excluding one-time integration and transition costs. Further explanation
of EBITDA, a non-GAAP financial measure, and a reconciliation of the
plant’s forecasted EBITDA to operating income have been included below
in this press release.
The purchase agreement provides for a maximum $50 million potential
earn-out, to be paid in common units or cash at the Partnership's
option. The earn-out calculation is based on cumulative Adjusted EBITDA
over two years following closing, with a minimum cumulative threshold of
$55 million. For every dollar of Adjusted EBITDA over this threshold,
two dollars are to be paid to the sellers. At the maximum earn-out of
$50 million, cumulative two-year Adjusted EBITDA would be $80 million,
and the implied multiple of total purchase price to Adjusted EBITDA in
the year before the earn-out payment would be 5.2x.
The acquisition is expected to be accretive to cash distributions per
unit beginning in 2013. Based on the timing of the close of the Agrifos
acquisition, the transaction is expected to have an immaterial impact on
cash distributions per unit for the fourth quarter of 2012.
In conjunction with the closing of this transaction, Rentech Nitrogen
has secured commitments from its existing and new lenders to amend its
existing debt facility, and expand its borrowing base from $135 million
to $300 million. The facility also includes an accordion feature to
expand the debt capacity by an additional $35 million, subject to new
lending commitments, to finance future growth projects. GE Capital
served as administrative agent and GE Capital Markets served as sole
lead arranger and book-runner for the debt facilities.
The transaction, which is subject to customary closing conditions, is
anticipated to close within one week of the date of this announcement.
Commenting on the transaction, John Diesch, President of Rentech
Nitrogen, said, “We are excited to bring Agrifos’ Pasadena plant and its
employees into the Rentech Nitrogen family. We have spent considerable
time conducting due diligence on this facility and believe that it is an
accretive acquisition that will increase Rentech Nitrogen’s value by
diversifying risk and enhancing its growth profile.” Mr. Diesch
continued, “We are confident in our integration plan for this asset and
we believe our operating expertise can be applied to the Pasadena site
to enhance plant operations and allow us to execute on growth plans at
Imperial Capital, LLC and BMO Capital Markets acted as financial
advisors to Rentech Nitrogen in connection with the transaction.
Conference Call and Investor Presentation
The Partnership will hold a conference call today at 7:00 a.m. PDT to
discuss the transaction. The slide presentation to be used in
conjunction with the call will be available just prior to the call at www.rentechnitrogen.com
within the Investor Relations portion of the site under the Presentation
section. Callers may listen to the live presentation, which will be
followed by a question and answer segment, by dialing 800-706-3081 or
706-679-9998 for international callers. An audio webcast of the call
will be available on the same web page as the presentation. A replay
will be available by audio webcast and teleconference from 9:00 a.m. PDT
on November 1 through 9:00 a.m. PST on November 8. The replay
teleconference will be available by dialing 800-633-8284 or 402-977-9140
for international callers and the reservation number 21610341.
Disclosure Regarding Non-GAAP Financial Measures
EBITDA is defined as operating income plus depreciation expense. EBITDA
is used as a supplemental financial measure by management and by
external users of our financial statements, such as investors and
commercial banks, to assess:
the financial performance of our assets without regard to financing
methods, capital structure or historical cost basis; and
our operating performance and return on invested capital compared to
those of other publicly traded limited partnerships and other public
companies, without regard to financing methods and capital structure.
EBITDA should not be considered an alternative to net income, operating
income, net cash provided by operating activities or any other measure
of financial performance or liquidity presented in accordance with GAAP.
EBITDA may have material limitations as a performance measure because it
excludes items that are necessary elements of our costs and operations.
In addition, EBITDA presented by other companies may not be comparable
to our presentation, since each company may define these terms
The table below reconciles the Pasadena plant’s 2013 forecasted EBITDA
to operating income for the twelve months ending December 31, 2013,
excluding one-time costs associated with transition and integration
(stated in millions).
2013 Estimated Plant EBITDA
About Rentech Nitrogen Partners, L.P.
Rentech Nitrogen (www.rentechnitrogen.com)
was formed by Rentech, Inc. to own, operate and expand its nitrogen
fertilizer business. Rentech Nitrogen’s assets consist of a nitrogen
fertilizer facility located in East Dubuque, Illinois, owned by Rentech
Nitrogen, LLC, the operating subsidiary of Rentech Nitrogen Partners,
L.P. The facility is located in the Mid Corn Belt in the northwestern
corner of Illinois, adjacent to the Iowa and Wisconsin state lines, and
produces primarily anhydrous ammonia and urea ammonium nitrate solution,
using natural gas as its primary feedstock, for sale to customers in the
Mid Corn Belt.
This press release contains forward-looking statements about matters
such as: forecasted EBITDA, operating income and accretion; the outlook
for the business; our ability to consummate the acquisition of Agrifos
and the related financing; successful integration and future performance
of acquired assets or businesses; and successful implementation and
execution of potential internal growth projects. These statements are
based on management’s current expectations and actual results may differ
materially as a result of various risks and uncertainties. Other factors
that could cause actual results to differ from those reflected in the
forward-looking statements are set forth in Rentech Nitrogen’s prior
press releases and periodic public filings with the Securities and
Exchange Commission, which are available via Rentech Nitrogen’s website
The forward-looking statements in this press release are made as of the
date of this press release and Rentech Nitrogen does not undertake to
revise or update these forward-looking statements, except to the extent
that it is required to do so under applicable law.
Source: Rentech Nitrogen Partners, L.P.
Rentech Nitrogen Partners, L.P.
Julie Dawoodjee Cafarella,
Vice President of Investor Relations and Communications