Liquefied natural gas (LNG) export terminal developer NextDecade LLC of The Woodlands, TX, has struck a tentative deal to go public in a reverse merger transaction that values the company at $1 billion.
NextDecade merger partner Harmony Merger Corp. is a publicly traded special purpose acquisition company with $117.5 million of cash in trust. The proposed all-stock transaction is expected to yield a combined entity with a pro forma enterprise value exceeding $1 billion at closing, with additional stock consideration to be paid to NextDecade shareholders upon the achievement of certain milestones, Harmony said Monday afternoon.
“After conducting an extensive review with our board of directors regarding development financing considerations, we are delighted to be advancing the process of merging with Harmony,” said NextDecade CEO Kathleen Eisbrenner. “This transaction is a natural next step in NextDecade’s strategy of continuing to de-risk its projects to attract world-class customers and access capital on competitive terms.”
Current Harmony stockholders are expected to own 13.4% of the combined company immediately following the merger. Harmony and NextDecade have also reserved capacity for strategic partners to invest in the company prior to closing.
NextDecade’s first proposed LNG export facility, the Rio Grande LNG project, located in Brownsville, TX, along with the associated Rio Bravo pipeline originating in the Agua Dulce market area, is “well-positioned” among the second wave of U.S. LNG projects, Harmony said.
The company submitted its pre-filing request to the Federal Energy Regulatory Commission in March 2015 and filed its formal application last May. “The company has robust commercial offtake and gas supply strategies in place, and has signed 30 mtpa [million tonnes per annum] of nonbinding customer commitments to date, indicating strong market interest,” Harmony said.
During a brief conference call Tuesday to announce the deal, Eisbrenner said the Rio Grande project enjoys particular commercial, regulatory, engineering and gas supply advantages, adding that it is close to “some of the lowest-cost resource basins in the world.”
NextDecade’s principal equity holders include funds managed by York Capital Management, Valinor Management and Halcyon Capital Management, who together own a majority interest. The proposed merger, subject to conditions, is expected to close late in the second quarter.
“We are pleased to work towards bringing our stockholders this unique opportunity to participate in the U.S. LNG export market at what we at Harmony believe to be a discount to intrinsic value,” said Harmony CEO Eric Rosenfeld. “NextDecade’s commercial and regulatory progress, coupled with its location on the Texas Gulf Coast in close proximity to the Permian Basin and Eagle Ford Shale, positions the company to provide low-cost LNG to customers around the world.”