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Archrock To Buy Remaining Public Stake In Archrock Partners In $607 Mln Deal

Archrock Inc. (AROC) and Archrock Partners L.P. (APLP) said that they have entered into a definitive merger agreement under which Archrock will acquire all of the outstanding common units of Archrock Partners it does not already own for Archrock common stock valued at about $607 million, based on the most recent closing price of Archrock common stock.

Under the merger agreement, each outstanding common unit of Archrock Partners that Archrock does not already own will be converted into 1.400 shares of Archrock common stock, representing a 23.4 percent premium to the Archrock Partners closing price on December 29, 2017; and a 23.9 percent premium to Archrock Partners volume-weighted average trading price during the ten trading days ended December 29, 2017.

The transaction is expected to be immediately accretive to Archrock, and the combined company is expected to have a cash available for dividend coverage ratio above 2.00x through 2020. Management intends to recommend to the Archrock board of directors a 10 percent increase in the first full quarterly dividend following the completion of the transaction and expects a 10 to 15 percent annual dividend growth rate through 2020.

Following the completion of the transaction, Archrock is expected to have an about $2.8 billion enterprise value and will continue to be the largest outsourced provider of natural gas compression services in the United States.

Stockholders of Archrock and unitholders of Archrock Partners are expected to benefit from the larger size of the combined company, improved equity trading liquidity, and a lower cost of funding for future growth. Following the completion of the transaction, Archrock does not expect to pay cash federal income taxes through at least 2023.

Under the terms of the merger agreement, Archrock will acquire all of the approximately 41.3 million outstanding units of Archrock Partners it does not already own at a fixed exchange ratio of 1.400 Archrock common shares for each publicly held common unit of Archrock Partners.

Archrock Partners common units will no longer be publicly traded after the transaction. In aggregate, Archrock will issue approximately 57.8 million shares in connection with the proposed transaction, representing approximately 44.9 percent of the total shares outstanding of the pro forma combined entity.

Subject to customary approvals and conditions, the transaction is expected to close in the second quarter of 2018. The transaction is subject to the approval of APLP common unitholders and AROC stockholders and the effectiveness of a registration statement related to the issuance of the new AROC shares to Archrock Partners' unitholders.

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