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$14 Billion Deal to Create Mega-Pipeline Company – WSJ

  • Energy deal combines Oneok and Magellan, forming the second-largest U.S.-based pipeline company by stock-market value
The deal’s price tag amounted to a 22% premium over Magellan’s common units.
The deal’s price tag amounted to a 22% premium over Magellan’s common units. ( Kris Tripplaar/SIPA USA)

Colin Eaton. WSJ

EnergiesNet.com 05 16 2023

Pipeline operator Oneok agreed Sunday to buy smaller rival Magellan Midstream Partners for about $14 billion, a deal that would form one of the biggest U.S. companies involved in transporting and storing energy.

The deal’s price tag, including $8.8 billion in equity and $5.1 billion in cash, amounted to a 22% premium over Magellan’s common units as of Friday. Oneok said it would assume Magellan’s $5 billion in net debt. The deal was expected to close in the third quarter, pending the approval of regulators and investors.

The proposed tie-up would be by far the biggest U.S. energy deal announced so far this year. Some analysts have said the U.S. oil-and-gas sector is ripe for major corporate transactions this year, after energy prices surged last year and left companies with a large windfall of cash. In Oneok’s case, much of the cash portion would be financed through a debt offering, it said.

As of Friday, the companies’ combined stock-market value of nearly $40 billion exceeded that of large U.S. competitors Energy Transfer, Kinder Morgan, and Williams Cos. Among operators based in the U.S., only Enterprise Products Partners was valued at a higher amount, at $56.4 billion. Canadian rivals Enbridge and TC Energy were also worth more.

Magellan owns almost 10,000 miles of pipelines carrying refined products, such as gasoline, with dozens of interconnected storage facilities in Texas and Oklahoma through the Midwestern U.S. to North Dakota. It also owns marine storage facilities in the Houston area and Corpus Christi, Texas.

Oneok has a vast network of natural gas liquids pipelines, storage terminals and natural gas pipelines in many of the same regions in the Midwestern U.S., particularly in its home state of Oklahoma and in Texas.

Oneok expects it will be able to generate $1 billion of free cash flow in the first four years after the transaction closes.

Oneok Chief Executive Pierce Norton said the tie-up, in addition to being a vast expansion into a refined products pipeline network, would enable it to eventually grow into green energy businesses, such as so-called sustainable fuels and hydrogen.

“Our expanded products platform will present further opportunities in our core businesses as well as enhance our ability to participate in the ongoing energy transformation,” he said.

Goldman Sachs was the lead financial adviser for Oneok, while Kirkland & Ellis was the company’s legal adviser. Magellan’s financial adviser was Morgan Stanley & Co., and Latham & Watkins and Richards, Layton & Finger were Magellan’s legal advisers.

Write to Collin Eaton at collin.eaton@wsj.com

Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the May 15, 2023, print edition as ‘Deal to Create Mega-Pipeline Company’.

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