| Item 1.01 | Entry into a Material Definitive Agreement. |
Interest Purchase Agreement
On October 1, 2018, BP Midstream Partners LP (the “Partnership”) entered into an Interest Purchase Agreement (the “Interest Purchase Agreement”) with BP Products North America Inc. (“BP Products”), BP Offshore Pipelines Company LLC (“BP Offshore”), and BP Pipelines (North America) Inc. (“BP Pipelines” and together with BP Products and BP Offshore, the “Contributors”), to acquire (i) an additional 45.0% interest in Mardi Gras Transportation System Company LLC, a Delaware limited liability company (“Mardi Gras”), from BP Pipelines, (ii) a 25.0% interest in KM Phoenix Holdings LLC, a Delaware limited liability company (“KM Phoenix”), from BP Products, and (iii) a 22.6916% interest in URSA Oil Pipeline Company LLC, a Delaware limited liability company (“Ursa”), from BP Offshore, in exchange for aggregate consideration of $468.0 million (the “Acquisition”), funded with borrowings under the Partnership’s revolving credit facility.
The Interest Purchase Agreement contains customary representations, warranties and covenants of the Contributors and the Partnership. The Contributors, on the one hand, and the Partnership, on the other hand, have agreed to indemnify each other and their respective affiliates, officers, directors and other representatives against certain losses, including those resulting from any breach of their representations, warranties or covenants contained in the Interest Purchase Agreement, subject to certain limitations and survival periods.
The terms of the Acquisition were approved by the conflicts committee of the board of directors of the Partnership’s general partner, which consists entirely of independent directors. The conflicts committee engaged an independent financial advisor and legal counsel to assist in evaluating and negotiating the terms of the Acquisition.
In addition, in connection with the Acquisition, and pursuant to the terms of the Partnership’s Omnibus Agreement dated as of October 30, 2017, by and among BP Pipelines, the Partnership, the Partnership’s general partner, and, solely for purposes of Articles 4 and 6 thereof, BP America Inc., a Delaware corporation (the “Omnibus Agreement”), BP Pipelines has determined, and the general partner has approved, acting in good faith, that the BP Administrative Fee (as defined in the Omnibus Agreement) will be increased from $13.3 million per year to $14.6 million per year, effective as of January 1, 2020.
Immediately prior to the closing of the Acquisition, BP Pipelines’ wholly owned subsidiary, BP Midstream Partners Holdings LLC (“BP Holdco”), owned 4,581,177 common units representing limited partner interests in the Partnership and 52,375,535 subordinated units representing limited partner interests in the Partnership, representing an aggregate 54.4% limited partner interest. BP Holdco also owns a 100% interest in BP Midstream Partners GP LLC, a Delaware limited liability company and the general partner, which in turn owns all of the incentive distribution rights in the Partnership. The general partner, BP Holdco and the Contributors are all wholly owned subsidiaries of BP p.l.c. (together with its subsidiaries, “BP”). In addition, certain officers of BP also serve as officers and/or directors of the Partnership.
The foregoing description is not complete and is qualified in its entirety by reference to the full text of the Interest Purchase Agreement, which is filed as Exhibit 10.1 to this Current Report on Form8-K and incorporated herein by reference.
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
Also on October 1, 2018, the Partnership completed the Acquisition pursuant to the terms of the Interest Purchase Agreement. The description of the Interest Purchase Agreement included in Item 1.01 of this Current Report on Form8-K is incorporated by reference into this Item 2.01.
The Partnership, the general partner, and the Contributors have various relationships with one another. The information set forth in Item 1.01 regarding the relationships among the Partnership, the general partner, the Contributors, and BP is incorporated by reference into this Item 2.01.
