Analyzing the Financial Circumstances of a Midstream MLP Merger
In a Delaware Chancery Court investor class action suit, Brattle was retained by the plaintiffs to analyze the circumstances and impacts of a merger between two midstream oil and gas companies that were organized as Master Limited Partnerships (MLPs) and were controlled by the same General Partner (GP). Relying on extensive expertise regarding the MLP business structure, Brattle performed financial analyses to demonstrate that the common GP entity was the principal beneficiary of the merger, garnering billions of dollars in increased annual distributions – including hundreds of millions of dollars diverted from the unitholders of the acquired entity. A Brattle principal provided expert analysis of the economic prospects of the acquisition target, testifying that its contractual arrangements and commercial position providing gathering and processing services in the most prolific US natural gas producing basins—coupled with a stable balance sheet and credit profile—made it a solid and stable going concern, despite a downturn in commodity prices. The Brattle witness’s expert report and trial testimony were central to demonstrating that an increase in General Partner cash distributions – at the expense of cash distributions to legacy Regency limited partner unitholders – was the primary incentive for, and consequence of, the merger.