Filed by Southcross Energy Partners, L.P.
Commission File No. 001-35719
Pursuant to Rule 425 Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-12
Under the Securities Exchange Act of 1934
Subject Company: Southcross Energy Partners, L.P.
Commission File No.: 001-35719
The following is an email sent to employees of Southcross Energy Partners GP, LLC on January 26, 2018.
| AMID / SXE INTEGRATION UPDATE
Functional Team Report Out
Due to inclement weather, the Integration Functional Teams and Steering Committee leadership met via conference call in a collaborative working session on Jan. 16, 2018 to report out on our status for Day 1 readiness. During the session, teams focused on key accomplishments, next steps, and critical Day 1 milestones.
Most of the AMID leadership teams have visited with SXE employees in face-to-face meetings. As a result of those discussions, the functional teams are the process getting information out to employees. While all of the details that everyone is looking for are not yet available, teams continue to identify gaps and progress according to the project plans. To address the request for additional information, the Integration Team will increase the frequency of communication for both SXE and AMID employees.
A few takeaways touched upon include:
• More frequent communication is needed
• The commercial processes and supporting systems are complex and increased focus is required for Day 1 readiness
• HR plans need to be solidified and communicated
The Integration Team is committed to increase the frequency of face-to-face employee integration communication.
Closing is targeted for Q2, and execution of our robust project plans is critical to making that happen. | ||
|
NEED FOR SPEED
When an integration is announced, initially it may seem that the Close date is far in the distance and there’s plenty of time to address all of the details that are being identified. But what first seems like a marathon turns into a 1600-meter race. We have completed the first lap of the AMID/SXE Integration 1600-Meter Race. Now that we have completed the first couple of turns, integration teams must calibrate their pace for the remaining distance, and make sure that it’s fast enough to cross the finish line in a way that meets or beats our timeline. |
Key highlights from the various functions are:
Commercial
The team continues to put a great amount of effort into diving into the Contract-to-Cash and deal entry processes. The goal is identification of possible opportunities to optimize Quorum, scheduling, measurement, reporting, contracts and invoicing that will lead to AMID improvements that will be of value beyond the integration with SXE. This team is busy working to ensure that the plan is ready in time for the Close. Plans for Day 1 customer communications and potential targeted customer meetings were begun.
Next steps include:
| • | Continue discovery work around gas scheduling and nominations processes, gaps, and opportunities |
| • | Conduct joint working sessions focused on asset management |
| • | Obtain SXE inter-company contracts and collaborate with Finance / Accounting on future inter-company transfer / architecture discussions |
| • | Continue opportunity analysis on Contract-to-Cash process |
Must-do’s for Day 1 include:
| • | Business continuity is critical |
| • | Implement Contract Migration Plan |
| • | Cross access for AMID and SXE systems |
| • | Send customer communications and coordinate customer events |
Finance & Treasury
The team met in Dallas to conduct an in-depth discussion and analysis of the SXE model. They also finalized their project plan, including all dates, resources, tasks and critical milestones. The SXE Treasury Sarbanes-Oxley Act (SOX) narrative and other data requests were received.
Next steps include:
| • | Document SXE Daily Operations Report Process |
| • | Continue to review and analyze SXE letters of credit (LCs), leases and Parental Company Guarantees (PCGs) |
| • | Obtain SXE insurance policies and facilitate global insurance review with Lockton, to roll-out upon Close |
| • | Obtain SXE 2018 budget to review assumptions made, and bridge to acquisition model |
| • | Obtain SXE inter-company contracts and collaborate with Commercial / Accounting on future inter-company transfer / architecture discussions |
| • | Continue conducting working sessions (Financial Planning & Analysis, Treasury) |
| • | Collaborate with HR on communication / training for P-cards / expense reporting policies |
Must-do’s for Day 1 include:
| • | Ensure adequate ongoing insurance coverage, assign Broker of Record (Lockton) |
| • | Implement lease strategy |
| • | Implement LCs strategy |
| • | PCG / Bank transitions |
| • | Implement transition to AMID P-card plan |
| • | Defined settlement process between AMID and SXE |
Internal Audit
The team received requested Pre-Close documentation, and has begun their familiarization with SXE processes, policies, and procedures. They have begun preparation of preliminary Controls mapping between AMID and SXE. They also updated their project plans based on additional discovery about AMID function dependencies.
Next steps include:
| • | Continue review of SXE processes and other information received |
| • | Determine SXE IA resource role during the transition |
Must-do’s for Day 1 include:
| • | Preliminary audit approach based on the Accounting integration plan |
| • | Consolidated Risks and Controls Matrix |
Accounting
Since the last report out, the Accounting Team met in Dallas, where they discussed the SXE organization structure and accounting responsibilities, and obtained a high-level understanding of company operations.
Next steps include:
| • | Follow-up on requested Pre-Close documentation |
| • | Familiarization with SXE accounting processes, policies, and procedures |
| • | Assess project plans based on initial visit to SXE, and adjust as necessary |
| • | Hiring open positions |
Must-do’s for Day 1 include:
| • | Plans for preparation of combined SOX process documentation and document communication to Internal Audit |
| • | SXE Chart of Accounts mapped to AMID Chart of Accounts |
| • | Updated Chart of Accounts |
| • | Monthly Close calendars and activities defined and communicated |
| • | Design for combined consolidation and financial reporting process in place |
Technical & Shared Services
The team has begun reviewing the SXE files and understanding their processes, and have begun identifying gaps and developing plans to integrate. The Integrity group met to discuss gas / liquid Integrity Management plans.
Next steps include:
| • | Procurement, Land / Right-of-Way (ROW) and Geographic Information Systems (GIS) groups are meeting face-to-face in Dallas Jan. 18 |
| • | Ascertain GIS applications currently in use and determine what services they provide that would benefit AMID |
| • | Continue to review SXE files and generate further discussion |
| • | Complete project plan |
Must-do’s for Day 1 include:
| • | Creation of Authority for Expenditure (AFEs) for SXE transferred projects |
| • | Reoccurring lease payments |
| • | Vendor onboarding plan / communications |
| • | Critical Master Service Agreements (MSAs) and Purchase Orders (POs) |
Ops Services & Control Center
Since the last report out, the major activity has been reviewing the SXE files to understand their processes, identify gaps, and further develop plans to integrate.
Next steps include:
| • | Visit to SXE Control Center on Jan. 18 |
| • | Develop plan to identify people, processes and systems to support SXE Natural Gas Liquids (NGL) measurement |
Must-do’s for Day 1 include:
| • | Onboard critical staff |
| • | Conduct physical inventory |
| • | Communicate update contacts list |
| • | Supervisory Control and Data Acquisition (SCADA) and Control Center transition plans in place |
| • | IT license transfers initiated |
| • | Implement AMID Control Room Management (CRM) plan, policies, procedures and protocols |
| • | Follow regulated policy for Fatigue Management and Hours of Service (HOS) per CRM |
| • | Initialize and review Documentation & Rationalization (D&R) of alarms |
| • | Validate operator qualified controller credentials |
EHS & Regulatory
Good news was reported regarding recent SXE truck leases. ARI and Enterprise Leasing have verbally agreed that AMID can assume these leases. This is a significant cost avoidance attributable to great work by the team.
Next steps:
| • | Safety Manual conversion is ongoing and expected to be complete prior to Close |
| • | Operator Qualification (OQ) Manuals conversion is ongoing |
| • | Gathering data for rebranding cost estimates |
Must-do’s for Day 1 include:
| • | Complete internal incident notification protocol training and mock exercise |
| • | Order uniforms and safety equipment |
| • | Fuel card availability |
| • | Power of Attorney (POAs) for fleet transfers |
Legal
The Legal team has established all deadlines for the integration project plan, including deliverables for Pre-Close, Day 1, and Post Close. SXE continued to provide AMID with policies and other Pre-Close documentation.
Next steps:
| • | Working through action items that have dependencies on other groups |
| • | Continue receiving legal department information from SXE and conducting gap analysis |
Must-do’s for Day 1 include:
| • | Complete new entity structure |
| • | Make all requisite SEC filings |
| • | Identify confidentiality agreements and special obligations and communicate such obligations to affected employees |
| • | Complete gap analysis of Delegation of Authority (DOA) to ensure applicability across the organization on Day 1 |
| • | Integrate litigation reporting and begin consolidating management of litigation |
Human Resources (HR)
HR is working to confirm employee conversion and transition plans for SXE employees as well as replacement positions to be hired. SXE employee communication has been drafted and is in the review process.
Next steps:
| • | Confirm details of employee conversions and transitions |
| • | Distribute message to SXE employees |
Must-do’s for Day 1 include:
| • | Employee onboarding / offboarding |
| • | Communicate HR policies |
| • | Benefits enrollment |
| • | Complete hiring for backfills |
| • | Communicate required employee training |
| • | Office space availability |
| • | Job transition and training plans in place |
Information Technology (IT)
IT continued to discuss and identify projects with a potential integration impact. This is critical to understanding the implementation timeline for several of the functions, as it can have a direct impact on their transition plans. Other accomplishments include engaging with the TIES business analyst to assist collecting data for contract reconciliation, a preliminary review of IT licensing information, and identification of 3rd party resources required for integration execution. The support of the Contract-to-Cash review and mapping continued.
Next steps:
| • | Deep dive of network infrastructure, server inventory and communications |
Must-do’s for Day 1 include:
| • | AMID email addresses for previous SXE employees on Day 1 |
| • | Cross domain network access |
| • | Critical application logons for key employees |
| • | Draft communication for Day 1 IT support |
| • | Identify and engage 3rd party vendors / contractors required for integration execution |
| • | Continue management and successful delivery of in-flight IT projects required to integrate |
All integration work involves planning for how the integrated company will operate after the transaction closes. Until the transaction is completed, the parties remain separate and independent competitors in the market, and it remains business as usual for each company. This issue is purely informational and does provide any binding right for employees of either AMID or SXE.
Forward Looking Statements
This employee communication and accompanying statements may contain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements that are not statements of historical facts, including statements regarding SXE’s future financial position, results, business strategy, guidance, distribution growth, and plans and objectives of management for future operations, are forward-looking statements. We have used the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “would,” “potential,” and similar terms and phrases to identify forward-looking statements in this communication. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions could be inaccurate, and, therefore, we cannot assure you that the forward-looking statements included herein will prove to be accurate. These forward-looking statements reflect our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside our control. Additional risks include the following: the ability to obtain requisite regulatory and unitholder approval and the satisfaction of the other conditions to the consummation of the proposed transaction, the ability of AMID to successfully integrate SXE’s operations and employees and realize anticipated synergies and cost savings, actions by third parties, the potential impact of the announcement or consummation of the proposed transaction on relationships, including with employees, suppliers, customers, competitors and credit rating agencies, and the ability to achieve revenue and other financial growth, and volatility in the price of oil, natural gas, and natural gas liquids and the credit market. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors which are described in greater detail in our filings with the SEC. Please see SXE and AMID’s “Risk Factors” and other disclosures included in their Annual Reports on Form 10-K for the year ended December 31, 2016, and Quarterly Reports on Form 10-Q for the quarter ended March 31, 2017, the quarter ended June 30, 2017 and the quarter ended September 30, 2017. All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. The forward-looking statements herein speak as of the date of this employee communication. SXE and AMID undertake no obligation to update any information contained herein or to publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this employee communication.
Additional Information and Where to Find It
This employee communication relates to a proposed business combination between SXE and AMID. In connection with the proposed transaction, SXE and/or AMID expects to file a proxy statement/prospectus and other documents with the SEC.
In connection with the Merger, AMID filed a registration statement on Form S-4, including a proxy statement/prospectus of SXE and AMID, with the SEC on January 10, 2018. WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Any definitive proxy statement/prospectus (if and when available) will be mailed to unitholders of SXE. Investors and security holders will be able to obtain these materials (if and when they are available) free of charge at the SEC’s website, www.sec.gov. In addition, copies of any documents filed with the SEC may be obtained free of charge from SXE’s investor relations website for investors at http://investors.southcrossenergy.com, and from AMID’s investor relations website at http://www.americanmidstream.com/investorrelations. The content of the websites referenced above are not deemed to be incorporated by reference into the registration statement or the proxy statement/prospectus. Investors and security holders may also read and copy any reports, statements and other
information filed by AMID and SXE with the SEC at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for further information on its public reference room.
No Offer or Solicitation
This employee communication is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in the Solicitation
AMID and SXE and their respective directors and executive officers may be considered participants in the solicitation of proxies in connection with the proposed transaction. Information regarding SXE’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 9, 2017. Information regarding AMID’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 28, 2017. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.