Midstream energy company, SemGroup Corporation SEMG recently agreed to divest SemMaterials México, its asphalt
business to Ergon Asfaltos México HC, LLC. The deal is expected to be valued at $70 million, which incorporates a compensation of around $15 million of net working capital. The deal is expected to be closed by the second quarter of 2018.
business to Ergon Asfaltos México HC, LLC. The deal is expected to be valued at $70 million, which incorporates a compensation of around $15 million of net working capital. The deal is expected to be closed by the second quarter of 2018.
Following the news of the divestment, the company's stock has gained more than 3%.
Move Rationale
SemGroup plans to utilize the proceeds from the deal for pre-funding capital growth projects and support the Houston Fuel Oil Terminal Company acquisition. Notably, the company was supposed to pay $600 million in cash as second payment for the acquisition to Alinda Capital Partners.
The deal also falls in line with the company's strategy to strengthen its balance sheet and focus on its midstream services in Canada, the Gulf Coast, and Mid-Continent. As of Sep 30, 2017, the company had cash and equivalents of $68 million, while its long-term debt amounted to more than $3 billion.
About SemMaterials México
It offers asphalt products, technology and pavement services in Mexico. It has two national laboratories and 14 in-country terminals. SemMaterials México has its presence in every region of the country.
Price Performance
SemGroup has lost 28.9% of its value in the last year against 1.1% growth of its industry.
About SemGroup
SemGroup provides gathering, transportation, storage, distribution, blending, marketing and other midstream services to producers, refiners of petroleum products and others market participants located in Midwest and Rocky Mountain regions of the United States of America. The company operates in the pipeline gathering and processing segments of the natural gas midstream industry in the United States and Canada. SemGroup Corp is headquartered in Tulsa.
By: Zacks Equity Research.
Photo: Arab Shipping News.
Review: Emerging Market Formulations & Research Unit, Flagship Records.