DT Midstream, Inc. (DTM) announced that it has entered into an agreement to acquire an additional 26.25% ownership interest in Millennium Pipeline for approximately $552 million in cash. The transaction will be financed with cash on hand and available capacity under the company’s revolving credit facility. Under the terms of the agreement, DTM will acquire National Grid’s full ownership interests in Millennium Pipeline, which, upon closing, will bring DT Midstream’s total ownership in Millennium Pipeline to 52.50%.
Millennium Pipeline is a 263-mile interstate pipeline, strategically positioned to deliver Northeast Marcellus and Utica gas to utility and power plant markets across New York State and New England. DT Midstream is a founding developer and existing owner in Millennium Pipeline, which has been in service since 2008. The pipeline is also interconnected with the company’s wholly-owned Bluestone Gathering Lateral Pipeline which has upstream connections to its Susquehanna Gathering System.
“Increasing our ownership in a premium integrated asset like Millennium Pipeline directly aligns with our strategic investment thesis and accelerates our growth plan,” said David Slater, President and CEO. “This transaction also increases the revenue contribution from our pipeline segment, underpinned by take-or-pay contracts with high credit quality customers,” added Slater.
Jeff Jewell, Executive Vice President and CFO of DT Midstream, said, “This transaction will be immediately value accretive and, given the strength of our balance sheet, will be fully funded with cash on hand and available credit capacity.”
Transaction Details
- Transaction consideration: Approximately $552 million in cash
- Transaction multiple: 10x 2023 Adjusted EBITDA
- Transaction financing: Cash on hand and revolving credit facility drawings
The company expects an incremental Adjusted EBITDA contribution of $12 to $14 million in 2022 from the transaction, subject to close timing and other customary adjustments. The company looks forward to providing a full update to investors and analysts on its next quarterly earnings conference call.
Strategic Rationale
Increased ownership in Millennium Pipeline directly aligns with DT Midstream’s investment thesis of owning pure play natural gas assets connecting premier supply basins with key demand centers and market regions, and with revenues supported by long-term take-or-pay contracts with creditworthy and diverse customers.
Closing Details
The transaction has been approved by DT Midstream's Board of Directors and is expected to close in the fourth quarter of 2022, subject to regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, and other customary closing conditions.
Advisors
Lazard is serving as financial advisor and Shearman & Sterling LLP is serving as legal counsel to DT Midstream.
