Summit Midstream announced that it and its wholly owned subsidiary, Summit Midstream Partners, have entered into definitive agreements to acquire Tall Oak Midstream Operating and its subsidiaries from an affiliate of Tailwater Capital for a mix of cash and equity consideration. The transaction is expected to close in the fourth quarter of 2024, subject to customary closing conditions, shareholder approval and regulatory approvals. With an anticipated $250M in combined pro forma adjusted EBITDA for 2024 and 3.8x expected leverage at closing, Summit said it is now positioned with more scale, higher free cash flow generation and lower pro forma leverage that it believes will enable the company to consider returning capital to shareholders for example, through preferred dividends, common dividends and/or share buybacks starting in 2025. Pursuant to the terms of the definitive agreements, Summit will acquire 100% of the membership interest in Tall Oak Midstream for $155 million upfront cash consideration, expected to be financed through Summit’s credit facility, and approximately 7.5 million shares of a combination of SMC Class B common stock and a corresponding number of common units of the Partnership (in an Up-C structure), representing approximately 40% ownership in the pro forma Company. The Class B common stock and Partnership common units are convertible, at Tailwater’s election, into SMC common stock on a 1-for-1 basis. In addition, Summit will pay $25 million contingent consideration in cash over certain measurement periods through March 31, 2026. On a pro forma basis, Tailwater Capital will own approximately 35% interest with a non-Tailwater controlled entity owning an approximately 5%5 interest. The Summit stock held by Tailwater Capital will be subject to a lock-up period of at least one year. At close, four directors appointed by Tailwater Capital will serve on the pro forma Summit Board, along with SMC’s existing board members and CEO.
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