Oneok over the weekend said it’s buying Magellan Midstream Partners for $18.8 billion in a deal that will create an oil and gas infrastructure company with a 50,000-mile pipeline network.
Oneok presently gets most of its earnings from natural gas liquids, natural gas gathering and processing and natural gas pipelines, while Magellan operates the longest refined petroleum product pipeline system in the U.S.
Terms call for Oneok
OKE,
to buy Magellan
MMP,
for a combination of cash and stock, valued at $67.50 using Friday’s closing prices, a 22% premium. Each Magellan shareholder will get $25 per share in cash and 0.6670 Oneok shares. The mix is 63% stock and 37% cash.
Magellan shares vaulted 15% to $63.65 in premarket action. Oneok stock fell 6%.
Oneok, an S&P 500
SPX,
component, will assume $5 billion in Magellan debt. It said the deal will lift earnings per share in 2024, with 3% to 7% annual accretion expected for 2025 through 2027. Expected synergies and tax benefits will boost average annual free cash flow per share by at least 20%, Oneok said.
“This acquisition creates a more resilient energy infrastructure company that is expected to produce stable cash flows through diverse commodity cycles,” said the companies in a statement.
Current Oneok holders will have 77% of the combined company at closing. The transaction is expected to close in the third quarter of 2023.
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