On April 22, Blueknight Energy Partners G.P. LLC (BKEP) stock was trending actively in the regular market. At the time of writing the stock had amassed a nice 38.33% and was trading at a price of $4.565 a share. At 3,535% of its average volume, the stock market had a new 52-week high of $4.600 during the session.
This upsurge in the stock came after the company announced its merger agreement with Ergon, Inc.
BKEP & Ergon’s Agreement
Late in 2021, Ergon Inc. made an offer to the company for acquiring all its common and preferred units which are not already owned by Ergon. Pursuant to the offer, the company and Ergon entered into a definitive agreement and plan of merger. Ergon Inc. is a chemicals and logistics firm based in Jackson, Mississippi.
Announced early morning today, the merger agreement will have an affiliate of Ergon acquire all outstanding shares of BKEP not already owned by them, in an all-cash transaction.
Moreover, the transaction was evaluated by the Conflicts Committee of the general partner board of the company. Following review, evaluation, and negotiation the committee unanimously approved the transaction, and thus, it in turn was approved by the GP board as well.
Additionally, the merger agreement is expected to be closed in the middle of this year.
In 2021, BKEP successfully exited its crude oil business, refinanced its credit facility, and announced two new projects. Recently, the company declared its 2021 year-end financial results with most items either in line with its guidance or exceeding it. The company did mark some increase in its revenue and operating margin while improving business performance and lowering cash interest expenses. But as of March 1, 2022, the company had only $1.1 million in cash while total debt was $110.0 million.
In January 2022, the company completed growth projects of acquiring an asphalt terminal and industrial park in Colorado. Furthermore, the company also expanded the storage, logistics, and product capabilities of one of its existing asphalt terminals. The growth projects are expected to contribute a combined incremental run-rate EBITDA of roughly $2.0 million annually upon completion.
While the company does have many growth projects underway and a nice revolving capital under its credit line, it is running out of cash at hand. Thus, the merger agreement with Ergon announced today, could not come at a better time. The merger agreement has investors celebrating and taking the stock to new highs in intraday trading.