ONEOK, an American midstream service provider, has agreed to acquire Magellan Midstream Partners in a cash-and-stock deal worth around $18.8bn including assumed debt of $5bn.
Magellan Midstream Partners is a publicly traded partnership listed on the New York Stock Exchange (NYSE). It is mainly engaged in the transportation, storage, and distribution of refined petroleum products and crude oil.
The partnership owns one of the longest refined petroleum products pipeline systems in the US, with access to almost half of the country’s refining capacity. The asset can store over 100 million barrels of petroleum products like gasoline, crude oil, and diesel fuel.
Magellan Midstream Partners’ subsequent merger with ONEOK will create an enlarged energy infrastructure company with a total enterprise value of $60bn.
ONEOK owns one of the major natural gas liquids (NGL) systems in the US that connects NGL supply in the Rocky Mountain, Permian, and Mid-Continent regions.
The combined firm will own over 40,233km of liquids-oriented pipelines. It will have substantial assets and operational expertise at the Gulf Coast and Mid-Continent market hubs.
ONEOK expects the combined liquids-focused portfolio to offer considerable potential for improved customer product offerings and more opportunities for international export.
ONEOK president and CEO Pierce Norton II said: “The combination of ONEOK and Magellan will create a diversified North American midstream infrastructure company with predominately fee-based earnings, a strong balance sheet and significant financial flexibility focused on delivering essential energy products and services to our customers and continued strong returns to investors.
“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 with an increased presence in sustainable fuel and hydrogen corridors.”
Under the terms of the deal, Magellan Midstream Partners’ unitholders will exchange each of the shares in the partnership for $25 in cash plus 0.67 of ONEOK shares. This gives an implied value of $67.5 per share for Magellan Midstream Partners and a premium of 22%, based on the closing prices on 12 May 2023.
In the pro forma company, ONEOK’s shareholders are expected to own a stake of around 77% while the remaining 23% will be held by Magellan Midstream Partners’ unitholders.
Magellan Midstream Partners president and CEO Aaron Milford said: “Throughout more than 20 years as a publicly traded company, Magellan has remained focused on safe and responsible operations, financial discipline and long-term investor value.
“We believe ONEOK shares these priorities, and we are pleased to join them in creating a stronger, more diversified midstream company.
“We believe the premium offered maximises value creation for Magellan’s unitholders and reflects the essential nature of Magellan’s assets and service offerings as well as the quality of our talented and innovative employees.”
The deal has been approved unanimously by the board of directors of the two companies and is anticipated to close in Q3 2023. Its closing is subject to the approvals of shareholders of both firms, Hart Scott Rodino Act clearance, and other customary conditions.
