DEFM14A: Aris Water Solutions to Merge with Western Midstream

Aris Water Solutions, Inc. and Aris Water Holdings, LLC will become subsidiaries of Western Midstream Partners, LP through a series of mergers, with Aris stockholders receiving cash and/or WES common units.

Summary

• Aris Water Solutions, Inc. (Aris) and Aris Water Holdings, LLC (Aris OpCo) will merge into Western Midstream Partners, LP (WES), becoming WES subsidiaries.
• Aris securityholders can elect to receive one of three forms of consideration for each share of Class A common stock or Aris OpCo Stapled Unit:
• Mixed Election: 0.450 WES Common Units and $7.00 in cash.
• Cash Election: $25.00 in cash, subject to proration to ensure the aggregate cash paid does not exceed $415.0 million.
• Common Unit Election: 0.625 WES Common Units.
• Securityholders who do not make a timely election will receive the Common Unit Election Consideration.
• Based on WES's closing price on August 5, 2025, the implied value per share was approximately $24.90 for the Mixed Election and $24.86 for the Common Unit Election.
• Based on WES's closing price on September 9, 2025, the implied value per share was approximately $24.14 for the Mixed Election and $23.80 for the Common Unit Election.
• The Aris board of directors has unanimously recommended that Aris stockholders vote FOR the proposal to adopt the Merger Agreement.
• Certain Aris securityholders, including affiliates of ConocoPhillips and Yorktown, William Zartler, and Amanda Brock, holding approximately 42% of outstanding Aris Common Stock, have agreed to vote in favor of the merger.
• Aris will hold a special meeting of stockholders on October 14, 2025, to vote on the Merger Agreement.
• Aris securityholders are expected to own approximately 7% of the outstanding WES Common Units following the closing, assuming maximum cash consideration.
• The Tax Receivable Agreement will be terminated, with Aris making aggregate payments of $80.0 million in cash to TRA Holders on the Closing Date, a reduction from the estimated $183.4 million Early Termination Payment.

Sentiment

Score: 8

Explanation: The merger offers a significant premium to Aris stockholders, strategic benefits through increased scale and diversification, and a favorable resolution to the Tax Receivable Agreement. While standard merger risks exist, the unanimous board recommendation and strong support from major stockholders suggest a positive outlook for the transaction's completion and long-term value creation.

Positives

• The aggregate value of the Merger Consideration is regarded as attractive relative to other transactions and peer companies.
• The Merger Consideration represents a premium of approximately 23% to Aris Class A Common Stock's closing price on August 5, 2025, and 20% to its 10-trading day volume-weighted average price prior to that date.
• Aris securityholders have flexibility to choose cash, units, or a combination, allowing participation in the combined company's future growth and synergies or immediate cash value.
• The fixed exchange ratios for unit consideration protect against a decrease in relative value if WES's unit price increases compared to Aris's stock price.
• WES Common Units are expected to provide greater trading liquidity due to higher average daily trading volume.
• WES pays a regular quarterly distribution approximately three times larger than Aris's dividend on an equivalent per-share basis.
• Significant synergies have been identified by Aris and WES management, from which Aris securityholders receiving WES units would benefit.
• The merger is expected to strengthen the combined company's investment-grade balance sheet, enhancing access to and reducing the cost of capital relative to Aris.
• The transaction expands the combined company's scale, operational diversity, and geographic footprint across the Permian Basin, positioning it as a premier water midstream provider.
• The combined company will establish a vertically integrated, full-cycle midstream provider with greater diversification across its customer and asset base.
• The Merger Agreement has no financing condition, and WES is believed to have sufficient funds for the cash portion of the consideration.
• The exchange of Aris Class A Common Stock and Aris OpCo Stapled Units for WES Common Units is intended to qualify for tax-deferred treatment under Section 721(a) of the Code.
• No WES unitholder approval is required for the Mergers.
• The Tax Receivable Agreement Amendment reduces the aggregate payment to TRA Holders to $80.0 million from an estimated $183.4 million.
• Support agreements from stockholders representing approximately 42% of outstanding Aris Common Stock ensure strong backing for the merger.

Negatives

• The value of the unit consideration will fluctuate with WES Common Unit prices, and the Merger Agreement does not include a price-based termination right for Aris.
• The Cash Election Consideration is subject to proration, meaning securityholders electing cash may not receive the full amount requested and may receive a portion in WES Common Units.
• Completion of the Mergers is subject to various conditions, including stockholder and regulatory approvals, which may not be satisfied or waived.
• Certain Aris executive officers and directors have interests in the Mergers (e.g., equity awards, severance, TRA payments) that differ from general securityholders, potentially influencing their support.
• The Merger Agreement limits Aris's ability to pursue alternative acquisition proposals and includes a breakup fee, which may discourage other bidders.
• Aris securityholders will have a reduced ownership and voting interest in the combined company and less influence over management, as WES's general partner has contractually-limited fiduciary duties.
• WES Common Units have different rights compared to Aris Common Stock and Aris OpCo Units.
• If the Merger Agreement is terminated under certain circumstances, Aris may be obligated to pay a $57.0 million breakup fee or reimburse WES for up to $11,875,000 in expenses.
• Failure to successfully integrate the businesses of WES and Aris could adversely affect WES's future results and the value of WES Common Units.
• Aris's business relationships may be disrupted due to uncertainty surrounding the Mergers.
• Significant non-recurring transaction and other costs will be incurred by both WES and Aris.
• Financial forecasts are based on assumptions that may not be realized, and actual results could vary materially.
• The opinion of Aris's financial advisor is based on information as of August 6, 2025, and will not reflect subsequent changes in circumstances.
• The exchange of Aris Class A Common Stock or Aris OpCo Stapled Units for WES Common Units may be taxable in certain circumstances, such as if WES is characterized as an investment company or corporation for tax purposes.
• Former Aris securityholders receiving WES Common Units may be subject to additional tax consequences, including recognition of built-in gain, if WES engages in certain subsequent transactions.

Risks

• Because the market price of WES Common Units has fluctuated and will continue to fluctuate, Aris securityholders cannot be sure of the value of the consideration they will receive in the Mergers, if completed.
• Aris securityholders electing to receive the Cash Election Consideration may not receive the amount of cash that they elect.
• Completion of the Mergers is subject to certain conditions and if these conditions are not satisfied or waived, the Mergers will not be completed.
• Certain executive officers and directors of Aris have interests in the Mergers that are different from, or in addition to, the interests of Aris securityholders generally, which could have influenced their decision to support or approve the Mergers.
• The Merger Agreement limits Aris's ability to pursue alternatives to the Mergers and may discourage other companies from trying to acquire Aris for greater consideration than what WES has agreed to pay pursuant to the Merger Agreement.
• A different set of factors and conditions affect WES Common Units and could have a negative impact on the unit price.
• Failure to complete the Mergers could negatively impact the share price and the future business and financial results of Aris.
• Potential litigation against WES and Aris could result in substantial costs, an injunction preventing the completion of the Mergers and/or a judgment resulting in the payment of damages.
• Aris securityholders will have a reduced ownership and voting interest after the Mergers and will exercise less influence over management, which has contractually-limited fiduciary duties to the unitholders of WES.
• WES Common Units to be received by Aris securityholders as a result of the Mergers will have different rights from Aris Common Stock.
• If the Merger Agreement is terminated, under certain circumstances, Aris may be obligated to reimburse WES for costs incurred related to the Mergers or pay the Breakup Fee to WES. These costs could require Aris to seek loans or use Aris's available cash that would have otherwise been available for operations, dividends or other general corporate purposes.
• The failure to successfully combine the businesses of WES and Aris in the expected time frame may adversely affect WES's future results, which may adversely affect the value of the WES Common Units that Aris securityholders would receive in the Mergers.
• Aris's business relationships may be subject to disruption due to uncertainty associated with the Mergers.
• WES and Aris will incur significant transaction and other costs in connection with the Mergers.
• The financial forecasts are based on various assumptions that may not be realized.
• The opinion of Aris's financial advisor speaks only as of the date rendered and will not reflect changes in circumstances between the signing of the Merger Agreement and the completion of the Mergers.
• The exchange of Aris Class A Common Stock or Aris OpCo Stapled Units, as applicable, for WES Common Units may be taxable in certain circumstances.
• WES may engage in transactions that cause Aris securityholders that receive WES Common Units pursuant to the Mergers to be subject to taxation in a manner different from that applicable to other holders of WES Common Units.
• Holders of WES Common Units received in the Mergers will generally be subject to the tax risks that apply to existing holders of WES Common Units.

Future Outlook

WES and Aris anticipate completing the Mergers in the fourth quarter of 2025, contingent upon receiving Aris stockholder approval and necessary regulatory clearances. The combined entity is expected to establish a differentiated produced-water system in the Delaware Basin, expand WES's New Mexico operations, and diversify its customer base through Aris's long-term contracts, enhancing its position as a full-cycle water and midstream provider.

Management Comments

• The Aris board has unanimously determined that it is advisable and in the best interests of Aris and its stockholders for Aris to enter into the Merger Agreement.
• The Aris board unanimously recommends that Aris stockholders vote FOR the proposal to adopt the Merger Agreement.
• WES expects the Mergers to create a stronger and more diversified customer base, both geographically and by source of revenue, enhancing WES's ability to compete for new business development opportunities.
• WES anticipates the combined infrastructure will create a fully integrated produced-water value chain, including gathering, disposal, recycling, beneficial reuse, industrial water, and long-haul transport via the Pathfinder pipeline.
• WES believes the Mergers will expand its New Mexico footprint, unlocking new opportunities to serve customers as a one-stop shop and grow its natural-gas, crude-oil, and NGLs gathering and processing businesses in the area.
• WES expects the Mergers to diversify its customer base through Aris's long-term contracts, acreage dedications, and minimum-volume commitments with investment-grade counterparties.
• WES highlights that the McNeill Ranch provides access to significant pore space and other surface use opportunities, adjacent to one of the fastest-growing areas in the Permian Basin.

Industry Context

The merger between Aris Water Solutions and Western Midstream Partners is set to create a more robust and diversified midstream entity, particularly in the Permian Basin's water infrastructure sector. This strategic combination aims to leverage complementary asset positions in the northern and southern Delaware Basin, positioning the combined company as a leading, vertically integrated, full-cycle water and midstream provider. This move aligns with broader industry trends towards consolidation, increased scale, and integrated service offerings to enhance capital efficiency and customer solutions in the energy sector, especially concerning produced water management and recycling.

Comparison to Industry Standards

• Citigroup Global Markets Inc.'s analysis of Aris selected public companies (Archrock, Delek Logistics Partners, Hess Midstream LP, Kinetik Holdings Inc., Kodiak Gas Services, Inc., Western Midstream Partners, LP) showed calendar year 2025 estimated Adjusted EBITDA multiples ranging from 7.6x to 10.0x (mean 9.0x, median 9.2x) and 2026 estimated Adjusted EBITDA multiples from 7.1x to 8.9x (mean 8.3x, median 8.6x).
• Citi's review of selected precedent transactions in the midstream industry (including ONEOK's acquisitions of EnLink Midstream, Energy Transfer's acquisition of Crestwood Equity Partners LP, Crestwood Equity Partners LP's acquisition of Oasis Midstream Partners LP, and Energy Transfer's acquisition of Enable Midstream Partners LP) indicated next 12 months estimated Adjusted EBITDA multiples ranging from 7.6x to 9.7x (mean 8.5x, median 8.3x).
• An illustrative 'Has/Gets' analysis by Citi suggested a potential value uplift for Aris Class A Common Stock and Aris OpCo Units of approximately 22.9% to 25.4% relative to Aris's closing price on August 5, 2025, based on blended 2026 estimated Adjusted EBITDA multiples for the pro forma combined company ranging from 8.7x to 8.9x.
• WES's regular quarterly distribution on its Common Units is approximately three times larger than Aris's dividend on an equivalent per-share basis, based on the Common Unit Election Consideration, offering potentially higher income for former Aris securityholders who opt for WES units.

Management Changes

Corporate Governance

Legal Proceedings

• As of September 9, 2025, three purported stockholders of Aris sent demand letters alleging disclosure deficiencies in the Registration Statement on Form S-4 filed by WES with the SEC on August 28, 2025, seeking corrective disclosures.
• WES and Aris believe that the allegations contained in such demand letters are without merit.
• No lawsuits have been filed as of September 9, 2025, but other potential plaintiffs may file lawsuits or send additional demand letters prior to the Closing Date.

Related Party Transactions

• The Tax Receivable Agreement Amendment, dated August 6, 2025, was entered into by Aris, WES, and the Supporting Stockholders (representing a majority in interest of the TRA Holders).
• The TRA Amendment provides for an aggregate payment of $80.0 million in cash to the TRA Holders, including affiliates of ConocoPhillips (~$32.4 million), Yorktown (~$24.9 million), William Zartler and his affiliates (~$3.3 million), and Amanda Brock (~$0.7 million).
• Voting and Support Agreements, dated August 6, 2025, were entered into by WES, Aris, and certain stockholders of Aris and unitholders of Aris OpCo, including COG Operating LLC (a wholly owned subsidiary of ConocoPhillips), Yorktown Energy Partners XI, L.P., Solaris Energy Capital, LLC (an affiliate of William Zartler), William Zartler, and Amanda Brock. These parties beneficially own approximately 42% of the outstanding Aris Common Stock.

Stakeholder Impact

• Shareholders: Will receive a premium for their shares and have the option to receive cash, WES Common Units, or a combination, allowing participation in the combined company's future growth and potentially higher distributions, but will have reduced ownership and voting influence in the combined entity.
• Employees: Continuing employees will receive comparable base salary/wage and target short-term cash incentive opportunities for one year post-merger, along with substantially comparable aggregate employee benefits. Unvested equity awards will be assumed by WES and converted into time-based awards, with performance conditions deemed met. Non-continuing employees' equity awards will vest and convert to cash, and severance benefits are available for qualifying terminations.
• Customers and Suppliers: Business relationships may experience disruption due to the uncertainty associated with the Mergers, potentially leading to renegotiations or shifts to other partners.
• Creditors: Aris's $500.0 million aggregate principal amount of 7.250% Senior Notes due 2030 are expected to remain outstanding and be assumed by a WES subsidiary, while the Credit Agreement is expected to be discharged.
• Regulatory Bodies: The merger requires HSR Act approval, and other governmental and regulatory approvals, which could involve concessions or conditions.

Next Steps

• Aris will hold a special meeting of its stockholders on October 14, 2025, to vote on the adoption of the Merger Agreement.
• WES and Aris expect to complete the Mergers in the fourth quarter of 2025, subject to stockholder and regulatory approvals.
• WES will file a registration statement on Form S-8 for the Common Units subject to Assumed RSU Awards as soon as reasonably practicable after the Effective Time.
• Upon completion of the Mergers, Aris Class A Common Stock will cease to be listed on the NYSE and will be deregistered under the Exchange Act.
• Aris will make aggregate payments of $80.0 million in cash to the TRA Holders on the Closing Date, prior to the Effective Time.

Key Dates

Recommendation

The Aris board's unanimous recommendation, coupled with a significant premium of approximately 23% over Aris's recent trading price, makes this a compelling offer for Aris stockholders. The strategic rationale for the merger, including enhanced scale, diversification, and an improved financial position for the combined entity, suggests long-term value creation. The favorable resolution of the Tax Receivable Agreement further de-risks the transaction for Aris. While the fluctuating value of WES units and potential proration for cash elections introduce some uncertainty, the overall terms and strategic benefits strongly favor accepting the merger.

Keywords

Merger, Acquisition, Midstream, Water Solutions, Permian Basin, SEC Filing, Proxy Statement, Corporate Governance, Tax Receivable Agreement, Western Midstream, Aris Water, Energy Infrastructure