Summit Midstream Corporation announced on October 1, 2024, that it has entered into definitive agreements to acquire Tall Oak Midstream Operating, LLC and its subsidiaries from an affiliate of Tailwater Capital LLC. This strategic acquisition is valued at approximately $450 million, marking a significant step in Summit's growth strategy. The transaction is expected to increase the company's scale and enhance its free cash flow generating capabilities.
The consideration for the acquisition includes $155 million in upfront cash and approximately 7.5 million shares of a combination of SMC Class B common stock and common units of the Partnership. This equity component represents approximately 40% ownership in the pro forma company. Additionally, up to $25 million in contingent cash consideration will be paid over certain measurement periods through March 31, 2026.
Tall Oak Midstream III operates a large-scale gas gathering and processing system in the Arkoma Basin, comprising two 220 MMcf/d natural gas processing plants and approximately 411 miles of natural gas gathering lines. The system also includes 65,000 horsepower of field and plant compression. The acquisition is expected to shift Summit's commodity exposure to a more equal weight of oil and natural gas-oriented drilling.
The transaction is anticipated to close in the fourth quarter of 2024, subject to customary closing conditions, shareholder approval, and regulatory approvals. Upon closing, four directors appointed by Tailwater Capital will join the pro forma Summit Board. Pro forma for the acquisition, Summit anticipates approximately $250 million in combined Adjusted EBITDA for 2024 and an expected leverage of approximately 3.8x at closing.
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