Buckeye Partners to buy Bahamas facility for $1.36 billion

(BestGrowthStock) – Pipeline operator Buckeye Partners LP (BPL.N: ) will buy an 80 percent stake in Bahamas Oil Refining Co International from private equity firm First Reserve Corp for $1.36 billion, to expand its oil storage and fuel blending facilities.

With a storage capacity of 21.6 million barrels, Bahamas Oil is the world’s fourth largest oil and petroleum products storage terminal, Buckeye said. Buckeye owns and operates about 5,400 miles of pipeline in the United States.

The deal, expected to be closed in the first quarter of 2011, will immediately add about 10 percent to Buckeye’s distributable cash flow per limited partner unit, it said.

“This acquisition … significantly expands our market reach by adding a global logistics hub to our portfolio of assets,” Buckeye CEO Forrest Wylie said in a statement.

Netherland’s Royal Vopak (VOPA.AS: ), the world’s largest independent storage tank operator, owns the rest of Bahamas Oil. It has the right to sell its interest on similar terms agreed with First Reserve, Buckeye said.

First Reserve started considering the sale of the asset — bought about two-and-half years ago — in late summer and drew interest from some other bidders as well, its Managing Director Tim Day told Reuters in an interview.

“This deal provides a relatively early monetization for this facility and accelerates an exit, which increases our IRR,” Day said, referring to internal rate of return for his firm.

As part of the deal, Buckeye will issue about 4.4 million limited partner units of a new class of interests at $57.04 each to First Reserve, for proceeds of $250 million.

First Reserve will also receive about 2.5 million Buckeye units at $60.40 each, about 6 percent discount to their Friday close, for proceeds of $150 million.

Buckeye shares rose about 1 percent to $65.56 in early morning trade on Monday on the New York Stock Exchange.

First Reserve will own about 8 percent of Buckeye as a result of the deal, Tim Day said.

Buckeye will raise about $425 million by selling units to institutional investors and said it has got commitments from Barclays Bank, SunTrust Robinson Humphrey, and SunTrust Bank for bridge facility of $775 million.

Barclays Capital is the financial adviser to Buckeye.

(Reporting by Krishna N Das in Bangalore and Paritosh Bansal in New York; Editing by Gopakumar Warrier)

Buckeye Partners to buy Bahamas facility for $1.36 billion