3. ACQUISITIONS AND DISPOSITIONS

Business Combinations

The following acquisitions were accounted for as business combinations:

2011 Transactions

On July 19, 2011, we acquired, from an affiliate of ExxonMobil Corporation (“ExxonMobil”) for $23.5 million in cash, a terminal in Bangor, Maine (“Bangor Terminal”) with approximately 140,000 barrels of storage capacity, a terminal in Portland, Maine (“South Portland Terminal”) with approximately 725,000 barrels of storage capacity through a 50/50 joint venture with Irving Oil Terminals Inc. and a 124-mile pipeline that connects the two terminals. We believe this acquisition represents our efforts to diversify into new geographic regions and to increase our marine terminals presence. The South Portland terminal is operated by our Development & Logistics segment. We account for the South Portland terminal using the equity method of accounting. See Note 8 for equity investment information. The pipeline, Bangor Terminal and equity investment are reported in the Pipelines & Terminals segment. We financed this acquisition with borrowings under our Prior BPL Credit Facility (as defined in Note 12). The purchase price was allocated principally to property, plant, and equipment and equity method investment.

On June 1, 2011, we acquired 33 refined petroleum products terminals with total storage capacity of over 10 million barrels and approximately 650 miles of refined petroleum products pipelines from BP Products North America Inc. (“BP”) for $166.0 million. The terminal and pipeline assets are located in the Midwestern, Southeastern and Western United States. BP entered into multiple commercial contracts with us concurrent with the acquisition relating to the continued usage of these assets. We believe the acquisition of these assets further extends our operations into new, key geographic markets. The operations of these acquired assets are reported in the Pipelines & Terminals segment. We funded this acquisition with borrowings under our Prior BPL Credit Facility. The purchase price has been allocated to tangible and intangible assets acquired and liabilities assumed, on a preliminary basis, as follows (in thousands):


Inventory		1,161
Property, plant and equipment		174,597
Intangible assets		8,940
Environmental liabilities		(18,722	)

Allocated purchase price	$	165,976

On December 18, 2010, we, through a wholly owned subsidiary, entered into a sale and purchase agreement with affiliates of FRC Founders Corporation (“First Reserve”), pursuant to which we agreed to acquire First Reserve’s indirect 80% interest in FRBCH, the indirect owner of BORCO, for $1.15 billion, financed through a combination of debt and equity, including the issuance of Class B Units and LP Units to First Reserve. BORCO is the fourth largest marine crude oil and petroleum products storage terminal in the world and the largest petroleum products facility in the Caribbean with current storage capacity of approximately 21.6 million barrels. The acquisition of this world-class terminal facility allows us to expand and diversify our operations by reaching beyond the continental United States and complements our existing portfolio of assets. On January 18, 2011, we completed the purchase of First Reserve’s interest in BORCO through the acquisition by us of all of the partnership interests in FR Borco Topco, L.P., which indirectly owned First Reserve’s interest.

Vopak, which is based in The Netherlands, owned the remaining 20% interest in FRBCH. On February 16, 2011, Vopak sold its 20% interest in FRBCH to us for approximately $276.5 million of cash and equity, which is a proportionate price and on the same terms and conditions as those in the sale and purchase agreement with First Reserve.

On January 13, 2011, we issued $650.0 million aggregate principal amount of 4.875% Notes due 2021 (the “4.875% Notes”) in an underwritten public offering. The notes were issued at 99.62% of their principal amount.

Total proceeds from this offering, after underwriters’ fees, expenses and debt issuance costs of $4.9 million, were approximately $642.6 million, and were used to fund a portion of the purchase price of the BORCO acquisition.

On January 18 and 19, 2011, we issued 5,794,725 LP Units and 1,314,870 Class B Units to institutional investors for aggregate consideration of approximately $425.0 million to fund a portion of the BORCO acquisition. On January 18, 2011, we issued 2,483,444 LP Units and 4,382,889 Class B Units to First Reserve as $400.0 million of consideration to fund a portion of the BORCO acquisition. On February 16, 2011, we issued 620,861 LP Units and 1,095,722 Class B Units to Vopak as $100.0 million of consideration to fund a portion of the BORCO acquisition. Equity issuance costs incurred on these transactions were approximately $4.6 million. The remaining purchase price was funded with cash on hand at closing and borrowings under our Prior BPL Credit Facility.

On January 18, 2011, in connection with the BORCO acquisition, we repaid all of BORCO’s outstanding indebtedness and settled BORCO’s interest rate derivative instruments, collectively representing approximately $318.2 million.

The following table presents the aggregate consideration paid or issued to complete the BORCO acquisition (in thousands):


	First Reserve		Vopak		Combined
Cash consideration	$	644,049	$	164,616	$	808,665
Fair value of LP Units and Class B Units issued (1)		407,391		96,110		503,501
Cash paid on behalf of the sellers (2)		96,241		15,780		112,021

Consideration issued to effect the transaction	$	1,147,681	$	276,506	$	1,424,187

(1)

On January 18, 2011 and February 16, 2011, we issued LP Units and Class B Units to First Reserve and Vopak, which represented a negotiated value of $400.0 million and $100.0 million of consideration, respectively. In accordance with accounting for business combinations, the fair values of the units issued to First Reserve and Vopak on their respective acquisition dates were determined to be $407.4 million and $96.1 million, respectively.

(2)

Approximately $79.3 million was to be held in escrow related to Bahamian transfer taxes payable, approximately $23.2 million was used to make certain payments to Vopak (BORCO’s operator) and to pay certain fees and expenses incurred by FRBCH and its affiliates in connection with the transaction and approximately $9.5 million was used to pay bonuses to employees that became payable as a result of the transaction.

We recorded goodwill, which represents both expected synergies from combining this terminal facility with our existing operations and the economic value attributable to future expansion projects resulting from this acquisition. We allocated negative fair values to certain unfavorable storage contracts at the date of acquisition and recorded them as current and long-term liabilities in the consolidated balance sheet (see Note 11 and Note 13). The unfavorable storage contracts are being recognized to revenue based on the estimated realization of the fair value established on the acquisition date over the contractual life. Fair values have been developed using recognized business valuation methodology. The operations of this terminal facility are reported in the International Operations segment. The purchase price has been allocated to tangible and intangible assets acquired and liabilities assumed as follows (in thousands):


Current Assets	$	40,842
Inventory		1,645
Property, plant and equipment		1,129,961
Intangible assets		191,000
Other assets		415
Goodwill		490,536
Current liabilities		(54,627	)
Debt		(318,167	)
Other liabilities		(57,418	)

Allocated purchase price	$	1,424,187

2010 Transaction

On December 10, 2010, we, through a wholly owned subsidiary, acquired a refined petroleum products terminal in Yabucoa, Puerto Rico through the acquisition of a Puerto Rico entity from an affiliate of Shell for $32.8 million, net of cash acquired of $3.5 million. The terminal includes 44 storage tanks with approximately 4.6 million barrels of gasoline, jet fuel, diesel, fuel oil and crude oil storage capacity. Shell entered into a commercial contract with us concurrent with the acquisition regarding usage of the acquired facility. The operations of these acquired assets are reported in the International Operations segment. The purchase price has been allocated to tangible and intangible assets acquired and liabilities assumed as follows (in thousands):


Current assets	$	183
Inventory		867
Property, plant and equipment		31,770
Intangible assets		3,363
Other assets		17,720
Current liabilities		(3,413	)
Other non-current liabilities		(17,720	)

Allocated purchase price	$	32,770

2009 Transaction

On November 18, 2009, we acquired from ConocoPhillips certain refined petroleum product terminals and pipeline assets for approximately $47.1 million in cash. In addition, we acquired certain inventory on hand upon completion of the transaction for additional consideration of $7.3 million. The assets include over 300 miles of active pipeline that provide connectivity between the East St. Louis, Illinois and East Chicago, Indiana markets and three terminals providing 2.3 million barrels of storage tankage. ConocoPhillips entered into certain commercial contracts with us concurrent with our acquisition regarding usage of the acquired facilities. We believe the acquisition of these assets has given us greater access to markets and refinery operations in the Midwest and increased the commercial value of these assets and certain of our existing assets to our customers by offering

enhanced distribution connectivity and flexible storage capabilities. The operations of these acquired assets are reported in the Pipelines & Terminals segment. The purchase price has been allocated to the tangible and intangible assets acquired, as follows (in thousands):


Inventory	$	7,287
Property, plant and equipment		44,400
Intangible assets		4,580
Environmental and other liabilities		(1,834	)

Allocated purchase price	$	54,433

Unaudited Pro forma Financial Results

Our consolidated statements of operations do not include earnings from BORCO prior to January 18, 2011, the effective date of the BORCO acquisition. The total revenue and net income for BORCO since the acquisition date of $177.6 million and $66.4 million, respectively, were included in our consolidated statement of operations for the year ended December 31, 2011. The following table presents selected unaudited pro forma earnings information for the years ended December 31, 2011, and 2010, as if the BORCO acquisition had occurred on January 1, 2010. This pro forma information does not give effect to any of the other acquisitions we have made since January 1, 2010, as pro forma results including those acquisitions would not be materially different from the information presented in our accompanying consolidated statements of operations. The pro forma information presented below was prepared using BORCO’s historical financial data and reflects certain estimates and assumptions made by our management. Our unaudited pro forma financial information was prepared for comparative purposes only and is not necessarily indicative of what our consolidated financial results would have been had we actually acquired BORCO on January 1, 2010 or the results that may be attained in the future (in thousands):


	(Unaudited) Year Ended December 31,
	2011		2010
Revenue:
As reported	$	4,759,610	$	3,151,268
Pro forma adjustments		8,422		193,120

Pro forma revenue	$	4,768,032	$	3,344,388


Net income :
As reported	$	114,664	$	201,008
Pro forma adjustments		3,231		36,400

Pro forma net income	$	117,895	$	237,408

Acquisition of Additional Interest in West Shore Pipe Line Company

On August 2, 2010, in connection with our exercise of a right of first refusal, we completed the acquisition of additional shares of West Shore Pipe Line Company (“West Shore”) common stock from an affiliate of BP, resulting in an increase in our ownership interest in West Shore from 24.9% to 34.6%. We paid approximately $13.5 million for this additional interest. We exercised our right of first refusal to purchase the additional shares because of the favorable economics associated with the investment opportunity and our desire to increase our ownership in a successful joint venture pipeline that we currently operate.

Dispositions

On May 11, 2011, we sold our 20% interest in West Texas LPG Pipeline Limited Partnership (“WT LPG”) to affiliates of Atlas Pipeline Partners L.P. for $85.0 million. WT LPG owns approximately 2300-mile common-carrier pipeline system that transports natural gas liquids from points in New Mexico and Texas to Mont Belvieu, Texas for fractionation. Chevron Pipeline Company, which owns the remaining 80% interest, is the operator of WT LPG. The proceeds from the sale were used to fund a portion of our internal growth capital projects in 2011. We recognized a gain of $34.7 million on the sale of our interest in WT LPG.

Effective January 1, 2010, we sold our ownership interest in an approximately 350-mile natural gas liquids pipeline (the “Buckeye NGL Pipeline”) that runs from Wattenberg, Colorado to Bushton, Kansas for $22.0 million. See Note 7 for further discussion.