Oneok Inc., a natural gas pipeline operator, has agreed to acquire Magellan Midstream Partners LP in an $18.8 billion deal that includes cash and stock transactions. The merger is expected to create one of the largest oil and natural gas pipeline operators in the United States. The deal includes $8.8 billion in new equity and the assumption of $5 billion of existing net debt.
The acquisition will give Oneok access to a network of crude oil and refined products pipelines and terminals that span from Texas to Minnesota. With this acquisition, Oneok, which currently only transports natural gas and its byproducts, will expand its reach to a broader range of products.
The combined company will have a total enterprise value of $60 billion, putting it among the top five largest US pipeline operators. Consolidation in the midstream sector is seen as a good move by industry analysts, who see the deal as a bold move by both companies.
Oneok has secured $5.25 billion in fully committed bridge financing to fund the cash consideration for the deal. The transaction is expected to close in the third quarter, subject to regulatory and shareholder approval.
The merger is expected to have a positive impact on earnings per share and free cash flow per share. The scale gains from the merger are expected to be at least $200 million a year. The companies believe that the merger will be beneficial in the long-term and will provide diversification and scale for the newly combined entity.
Pipeline operators are increasingly turning to mergers and acquisitions for growth as the transition to renewable energy pares the need for new links and threatens to make some of their existing assets redundant. The merger is expected to help Oneok redirect its long-term strategy and move it closer to the top of the class from a scale and diversification perspective.
In conclusion, the Oneok-Magellan merger is a significant development in the midstream sector. The combined entity is expected to be among the top five largest pipeline operators in the US, with access to a broad range of products and pipelines. The merger is expected to have a positive impact on earnings and free cash flow per share and is seen as a bold move to redirect the long-term strategy of both companies. The deal is expected to close in the third quarter, subject to regulatory and shareholder approval.
Social Plugin