Plains All American Pipeline, L.P. (NYSE:
PAA) disclosed today that it has sent a letter to the management of
SemGroup Corporation (NYSE: SEMG) ("SemGroup"), reiterating its proposal
to acquire all of the outstanding shares of the company.
In today's letter, PAA noted that SemGroup's recent third-quarter
earnings confirmed that PAA's $24.00 per share proposal offers more
value to SemGroup stockholders than SemGroup can generate on a
stand-alone basis. Likewise, SemGroup's planned initial public offering
of Rose Rock Midstream, L.P. threatens to reduce the value available to
SemGroup's shareholders in a sale of the company. Based on these
factors, coupled with the value inherent in its proposal, PAA again
encouraged SemGroup's management to enter negotiations to reach a
mutually agreeable transaction.
The full text of the letter follows below:
November 16, 2011
Mr. Norman J. Szydlowski
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Mr. John F. Chlebowski
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President & Chief Executive Officer
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Chairman of the Board
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SemGroup Corporation
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SemGroup Corporation
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Two Warren Place
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Two Warren Place
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6120 S. Yale Avenue, Suite 700
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6120 S. Yale Avenue, Suite 700
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Tulsa, OK 74136-4216
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Tulsa, OK 74136-4216
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Dear Gentlemen:
As stated in our prior letter, we firmly believe that our all cash
proposal of $24.00 per SemGroup share offers an attractive value for all
of your stockholders. SemGroup's current share price is a direct result
of our offer, which we disclosed publicly on October 24, 2011, rather
than an indication of SemGroup's stand-alone value. Absent our offer, we
believe that SemGroup's share price would decline to the levels at which
it traded in August. Furthermore, we believe that accepting our
proposal, including our offer to work with your management team to
identify additional value that may enable us to increase our price, is
in the best interest of SemGroup's stockholders.
This belief is supported by SemGroup's financial performance for the
third quarter, which was announced on November 14, 2011, and SemGroup's
disclosure that its 2011 adjusted EBITDA will be "in the lower half of"
the reduced 2011 adjusted EBITDA guidance range of $106 million to $122
million. SemGroup's reported adjusted EBITDA for the third quarter of
$27 million (after removing $2 million of non-recurring proceeds from a
class-action litigation settlement) results in year-to-date adjusted
EBITDA of $76 million, or approximately $102 million on an annualized
basis. In addition, maintenance capital expenditures and foreign cash
taxes further reduce the cash flow being generated by SemGroup by
approximately $20 million to $25 million. Even after reversing the
negative year-to-date adjusted EBITDA from the SemStream assets that
were contributed to NGL Energy Partners ("NGL") and adding the
anticipated annual distributions to be received from the investment in
NGL following the forbearance period on certain of the units, SemGroup's
adjusted EBITDA remains over $50 million below the financial projections
for 2011 included in the Plan of Reorganization (adjusted for the sale
of 49% of White Cliffs), which were used by SemGroup's own advisors to
justify a deemed value of $25.00 per share.
You have stated that you are pursuing the initial public offering of
Rose Rock Midstream, L.P. ("Rose Rock IPO") to provide a more
tax-efficient entity to create additional value through organic growth
projects and acquisitions. We believe that the Rose Rock IPO will not
provide any meaningful near-term benefits to SemGroup's stockholders
and, in fact, will destroy value if completed prior to consummation of a
transaction with PAA. Specifically, the Rose Rock IPO will saddle
SemGroup with ownership of illiquid securities in an entity that will
increase SemGroup's already outsized overhead costs and create an MLP
that will have limited suitable drop-down acquisition or organic growth
opportunities. Moreover, if pursued and completed, the Rose Rock IPO
will increase the transaction costs to us or any other acquirer of
SemGroup, and thus reduce the price that can be paid to SemGroup's
stockholders. Accordingly, the Rose Rock IPO destroys rather than
creates value for your stockholders. At a minimum, we believe SemGroup
should defer completion of the Rose Rock IPO until it has engaged in
constructive discussions with us regarding our proposal.
Our proposal continues to provide a significant premium relative to the
value at which SemGroup's shares would trade absent our offer including
any value which SemGroup's current management might be able to create on
a stand-alone basis, even giving full credit to SemGroup's publicly
announced growth initiatives. We note the reference on your conference
call discussing your third-quarter earnings to the fact that you are
"evaluating potential projects within the footprint of our existing
assets." Along those lines, we reiterate our request for the opportunity
to discuss our proposal in person with you and your management team to
determine whether there is additional value within SemGroup – including
any such projects to the extent they are feasible and generate
attractive, risk-adjusted economic returns – that would allow us to
increase the price that we could offer your stockholders. A negotiated
transaction would benefit all parties and we believe you owe it to the
actual owners of SemGroup, its stockholders, to explore this opportunity
for value creation.
We are committed to a transaction with SemGroup and look forward to
meeting with you and your team to discuss next steps toward achieving a
mutually acceptable, negotiated transaction.
Very truly yours,
Greg L. Armstrong
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Chairman and Chief Executive Officer
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Forward-Looking Statements
Except for the historical information contained herein, the matters
discussed in this press release are forward-looking statements that
involve certain risks and uncertainties. These risks and uncertainties
include, among other things, (i) our ability to successfully complete
the proposed transaction or realize the anticipated benefits of a
transaction; (ii) our ability to obtain stockholder, antitrust,
regulatory and other approvals for the proposed transaction, or an
inability to obtain them on the terms proposed or on any anticipated
schedule; (iii) uncertainty of our expected financial performance
following completion of the proposed transaction; (iv) and all factors
and uncertainties inherent in the marketing, transportation,
terminalling, gathering and storage of crude oil and other
petroleum-related products discussed in PAA's filings with the
Securities and Exchange Commission (the "SEC"). Forward-looking
statements, like all statements in this press release, speak only as of
the date of this press release (unless another date is indicated). We do
not undertake any obligation to publicly update any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Additional Information
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any
vote, consent or approval. No tender offer for the shares of SemGroup
has been made at this time. This press release relates to a potential
business combination transaction with SemGroup proposed by PAA. This
material is not a substitute for any tender offer statement, proxy
statement or any other document which PAA may file with the SEC in
connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS
ARE URGED TO READ ANY SUCH DOCUMENTS FILED WITH THE SEC CAREFULLY IN
THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Any such
documents will be available free of charge through the website
maintained by the SEC at www.sec.gov
or by directing a request to PAA at 333 Clay Street, Suite 1600,
Houston, Texas 77002, Attn: Investor Relations.
PAA, Plains AAP, L.P., a Delaware limited partnership, and Plains All
American GP LLC, a Delaware limited liability company ("PAA GP"), the
directors and executive officers of PAA GP, and other persons may be
deemed to be participants in any future solicitation of proxies or
consents from SemGroup's stockholders in respect of the proposed
transaction with SemGroup. Information regarding PAA GP's directors and
executive officers is available in PAA's Annual Report on Form 10-K for
the year ended December 31, 2010. Other information regarding potential
participants in such proxy solicitation or consent solicitation and a
description of their direct and indirect interests, by security holdings
or otherwise, will be contained in future filings relating to the
proposed transaction.
Plains All American Pipeline, L.P. is a publicly-traded master limited
partnership engaged in the transportation, storage, terminalling and
marketing of crude oil, refined products and liquefied petroleum gas and
other natural gas related petroleum products. Through its general
partner interest and majority equity ownership position in PAA Natural
Gas Storage, L.P. (NYSE: PNG), PAA is also engaged in the development
and operation of natural gas storage facilities. PAA is headquartered in
Houston, Texas.
Plains All American Pipeline, L.P.
Investor
Relations:
Roy I. Lamoreaux,713-646-4222 or
800-564-3036
Director, Investor Relations
or
The
Abernathy MacGregor Group
Media:
Tom
Johnson, 212-371-5999
Chuck Burgess, 212-371-5999