Macquarie Infrastructure Co LLC (MIC.N) said it would buy the 50 percent stake in liquids storage provider International-Matex Tank Terminals (IMTT) that it does not control for $1.03 billion in cash and stock.
Macquarie, which owns half of IMTT since 2006, said it expects the deal to add to its free cash flow this year given "a number of opportunities" to implement better expense controls and processes at the liquids storage provider.
Macquarie said it would pay $910 million in cash and the rest in stock to buy out the remaining stake from IMTT's founding Coleman family, at least three of whom are expected to retire after the deal closes later this month.
IMTT comprises ten marine terminals in the United States and two partially-owned terminals in Canada that store and handle petroleum products, vegetable and tropical oils, renewable fuels, and other chemicals.
Macquarie said it expects the deal to partly eliminate double taxation as IMTT would no longer pay federal taxes and Macquarie would no longer pay tax on the distributions it gets from IMTT.
Macquarie raised its 2014 underlying free cash flow forecast, excluding transaction-related expenses, to $4.55 per share, about 11.2 percent higher than 2013.
The company said it has "indicated" that it would distribute 80-85 percent of its free cash flow as cash dividend and said it raised its second quarter cash dividend to 95 cents per share.
Macquarie said IMTT's Chief Executive Thomas Coleman would retire, with Macquarie's CEO James Hooke initially becoming CEO of IMTT.
James May, Macquarie's IMTT asset director, would become CFO at IMTT. Hooke and May have served on IMTT's board for the past five years.
Barclays Capital Inc is Macquarie's financial adviser.
Macquarie's shares closed at $61.60 on the New York Stock Exchange on Monday.
(Reporting by Sneha Banerjee in Bangalore; Editing by Savio D'Souza)