US natural gas transportation company Oneok is to buy US pipeline and other product line operator Magellan Midstream Partners. The $18.8 billion deal, which includes debt, will be paid for by Oneok in cash and its own shares, the company said in a press release.
One common share of magellan for $25
Oneok will pay $25 per Magellan common share and add 0.6670 of its common stock. That translates to a premium of 22 percent given Madellan’s share price at the close of trading on U.S. exchanges on Friday. The buyer will also assume five billion dollars in debt.
For Oneok, which previously transported natural gas and liquefied natural gas (LNG), the takeover will open up Magellan’s infrastructure to transport refined products and crude oil. The merged company will focus 44 percent on gas, while refined products will account for 21 percent of the business.
“The combination of Oneok and Magellan will create a diversified North American transportation, storage and trading company with fee-based revenues, a strong balance sheet and significant financial flexibility,” said Oneok chief Pierce Norton, who will also lead the newly formed company.
The deal comes at a time when US natural gas prices are facing downward pressure due to oversupply. Oil prices have been falling this year on fears of a possible recession. But the companies believe their combination will create a more resilient energy infrastructure company that will produce steady cash flow even as commodity market cycles change.
Source: ÄŒTK
