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Pact to form biggest US public energy alliance
June 30, 2009, Tuesday
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ENTERPRISE Products Partners LP said yesterday that Teppco Partners LP had accepted its sweetened US$3.3 billion bid in a deal that would form the largest United States publicly traded energy partnership.
The deal, which would create a giant in the midstream energy sector, comes as values for the tax-friendly master limited partnerships rebound from a sell-off that saw many of them lose more than half their value last year.
Under an exchange of units, Enterprise will pay the equivalent of US$31.36 per unit of Teppco, a premium of 9.3 percent over Friday's closing price.
In April, Teppco had rejected a proposed US$2.75 billion takeover offer from Enterprise.
The combined firm would hold 77,250 kilometers of oil and natural gas pipelines; more than 200 million barrels of oil, oil products and natural gas liquids storage; and 27 billion cubic feet of natural gas storage.
The merged company would generate cost savings of at least US$20 million and be accretive in 2010, Enterprise Chief Executive Michael A. Creel said in a statement.
Master limited partnerships are a favored structure in the energy industry for many fee-based assets, such as pipelines and storage tanks. The partnerships do not pay corporate taxes and distribute nearly all their profits to their unit holders.
Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.
Teppco units were up 2.5 percent at US$29.40 in light trading before the market opened, while Enterprise dipped 1.1 percent to US$25.00.
At Friday's close, Teppco's unit price had jumped nearly 47 percent so far this year to US$28.69.
The deal, which would create a giant in the midstream energy sector, comes as values for the tax-friendly master limited partnerships rebound from a sell-off that saw many of them lose more than half their value last year.
Under an exchange of units, Enterprise will pay the equivalent of US$31.36 per unit of Teppco, a premium of 9.3 percent over Friday's closing price.
In April, Teppco had rejected a proposed US$2.75 billion takeover offer from Enterprise.
The combined firm would hold 77,250 kilometers of oil and natural gas pipelines; more than 200 million barrels of oil, oil products and natural gas liquids storage; and 27 billion cubic feet of natural gas storage.
The merged company would generate cost savings of at least US$20 million and be accretive in 2010, Enterprise Chief Executive Michael A. Creel said in a statement.
Master limited partnerships are a favored structure in the energy industry for many fee-based assets, such as pipelines and storage tanks. The partnerships do not pay corporate taxes and distribute nearly all their profits to their unit holders.
Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.
Teppco units were up 2.5 percent at US$29.40 in light trading before the market opened, while Enterprise dipped 1.1 percent to US$25.00.
At Friday's close, Teppco's unit price had jumped nearly 47 percent so far this year to US$28.69.
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