Koch Industries Rides US Shale Boom with PetroLogistics

29.05.2014 -

Refining, chemicals and biofuels company Flint Hills Resources, a subsidiary of Wichita, Kansas-based Koch Industries, will take PetroLogistics LP private in a deal worth $2.1 billion.

The company with net income of $175 million in 2013 on sales revenue of $757.5 million owns and operates the world's largest-capacity propane dehydrogenation plant, with capacity for 1.45 billion t of propylene.  Both chemical and polymer grade are produced at its facility located on the Houston Ship Channel.

To gain control of a plant that can convert cheap US shale gas into propylene, which it sells to major chemical producers such as Dow, BASF, Ineos and Total, Koch is also buying all of the membership interests in general partner PetroLogistics GP and assuming the company's unquantified debt.

"PetroLogistics' capabilities are well aligned with our existing chemical and refining business," Flint Hills CEO Brad Razook said in a statement.

Flint Hills will pay $14 in cash for each PetroLogistics unit to minority shareholders who own 27% of the company. A group of shareholders who control the remaining 73% will receive $12 per unit.

The latter group includes Lindsay Goldberg, York Capital Management, PetroLogistics' executive chairman, David Lumpkins, and its chief executive, Nathan Ticatch.

Minority shareholders will get $526.2 million, while the majority shareholders will get $1.22 billion, according to news agency calculations.

Through Flint Hills, Koch Industries is North America's ninth largest producer of polypropylene with 937 million lbs (about 452,000 t) of annual capacity, according to estimates. It acquired the facilities in Longview, Texas, and Marysville, Michigan, along with a cracker at Port Arthur, Texas, from Huntsman in 2007.  

Flint Hills also produces the propylene derivative cumene and operates 670,000 barrels a day of crude-oil processing capacity in Minnesota, Texas and Alaska.

With annual revenue of $115 billion, Koch Industries was the second largest private company in the US in 2013, according to Forbes. The company is led by brothers David and Charles Koch, two of the world's richest men.