MWE » Topics » Recent Developments

This excerpt taken from the MWE 10-Q filed May 12, 2008.

Recent Developments


On February 21, 2008, the Partnership completed the transactions contemplated by its plan of redemption and merger with the Corporation and MWEP, L.L.C., a wholly-owned subsidiary of the Partnership. Pursuant to this agreement, the Corporation redeemed for cash approximately 3.9 million shares of its common stock, which we refer to as the “redemption,” followed immediately by a merger, pursuant to which all remaining shares of the Corporation common stock were converted into Partnership common units, which we refer to as the “Merger.” As a result of the Merger, the Corporation is a wholly-owned subsidiary of the Partnership. In connection with the merger and redemption, the incentive distribution rights in the Partnership, the 2% economic interest in the Partnership held by MarkWest Energy GP, L.L.C. (the “General Partner”) and the Partnership common units owned by the Corporation were exchanged for Partnership Class A Units. Contemporaneously with the closing of the transactions contemplated by the Merger, the Partnership separately acquired 100% of the Class B membership interests in the General Partner that had been held by current and former management and certain directors of the Corporation and the General Partner for approximately $21.2 million in cash and 0.9 million Partnership common units. The Corporation paid to its stockholders approximately $240.5 million in cash in the redemption and the Partnership issued to the Corporation’s stockholders approximately 15.5 million Partnership common units in the Merger. As a result of the merger and redemption, the Corporation owns approximately 31% of the Partnership through the Class A units, which are not treated as outstanding units for purposes of GAAP purposes. Please refer to Note 3 of the accompanying Notes to the Condensed Consolidated Financial Statements included in Item 1 of this Form 10-Q for further information about the merger and redemption and related subsequent events.


We expect the merger and redemption to offer the following advantages:


·                  eliminates the incentive distribution rights in the Partnership (see Notes to the Consolidated Financial Statements included in Item 8 of our Form 10-K for the year ended December 31, 2007, for information on the incentive distribution rights), which will substantially lower our cost of equity capital;


·                  enhances the Partnership’s ability to compete for new acquisitions;


·                  improves the returns to the Partnership unitholders from the Partnership’s expansion projects following the redemption and merger;


·                  will be accretive to the Partnership’s distributable cash flow per common unit; and


·                  significantly reduces the costly duplication of services required to maintain two public companies.


The elimination of the incentive distribution rights increases cash available to be distributed to common unitholders. Please refer to “Distributions of Available Cash” in Part II, Item 5 of our Form 10-K for the year ended December 31, 2007, for further information. In addition, the Partnership will also be able to distribute available cash from the Corporation after the Corporation pays taxes on its portion of the earnings from its ownership of the Partnership Class A Units. Despite the additional interest expense from borrowings needed to complete the merger and redemption, we expect the cash available to distribute to common unitholders to increase in total and on a per common unit basis.


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