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Emerge Energy scores at least 10x return for Insight Equity

  • Master limited partnership went public in 2013
  • Insight Equity raises $338 mln in sale of units
  • Units trading above $100, up from $17 IPO price

Insight Equity has built up its Emerge Energy platform investment to projected 2014 EBITDA of $100 million, after zero EBITDA for the company’s predecessor during the recession, according to a source. Emerge Energy was formed in 2013 by combining Insight Equity’s 2008 acquisition of Superior Silica Sands, along with Direct Fuels and Allied Energy before its initial public offering last year at $17 per common unit.

The common units have since jumped to more than $100, with analysts at Stifel Nicolaus & Co hiking their price target to $120 per unit on June 19. The company has been winning mentions as the highest-performing IPO from 2013 as of early June, according to data providers such as Dealogic.

On June 23, Insight Equity sold 3.1 million units in a public offering at a price of $109.06 per unit, for gross proceeds of $338 million. The firm continues to own about 7.3 million units, according to a prospectus for the offering.

Meanwhile, Southlake, Texas-based Insight Equity continues its fundraising effort for Insight Equity III LP, with about $500 million committed out of a target of $750 million, according to a person familiar with the firm. At the current level, the firm has surpassed the $430 million raised from its Fund II, in 2010.

In one possible setback, Felicia Hardwick, the firm’s director of investor relations, has left the firm, according to a report by sister website peHUB. Ted Beneski, chief executive officer and managing partner of Insight Equity and Victor Vescovo, chief operating officer and managing partner, will assume Hardwick’s duties, according to emails from the firm cited by peHUB.

In Emerge Energy’s first quarter ended March 31, the company hiked its distribution to $1.13 per unit, up from $1 per unit in the fourth quarter. The $1.13 per unit represents an 82 percent increase over the initial 62 cents distribution in its IPO prospectus, the company said in its quarterly update. Looking ahead, Emerge Energy is working to open two new sand mines in Wisconsin by next year, to nail down more potential growth.

Among its kudos, Emerge Energy recently made it onto a list of “three little-known divided growth stocks profiting from the energy boom” by financial publisher Motley Fool. To be sure, Emerge Energy’s distributions could drop, depending on changes in energy prices and supply dynamics in the sand market.