ONEOK And Magellan Merger To Create $60-Billion Pipeline Giant

ONEOK will buy Magellan Midstream Partners in a cash-and-stock deal valued at $18.8 billion, creating a combined U.S. oil and gas pipeline giant with a total enterprise value of $60 billion, the two major pipeline operators said on Sunday.

Under a merger agreement, primarily gas-focused ONEOK will buy all outstanding units of Magellan for $25.00 in cash and 0.6670 shares of ONEOK common stock for each outstanding Magellan common unit. This would represent a current implied value to each Magellan unitholder of $67.50 per unit, for a 22% premium, based on May 12, 2023 closing prices.

The transaction, expected to close in the third quarter of 2023, has been unanimously approved by the board of directors of both companies. The closing of the transaction is subject to customary closing conditions, including the approvals of both ONEOK shareholders and Magellan unitholders, as well as Hart Scott Rodino Act clearance.

ONEOK said it had secured $5.25 billion in fully committed bridge financing for the proposed cash consideration.

With the acquisition of Magellan, ONEOK adds a primarily fee-based, refined products and crude oil transportation business.

“This acquisition creates a more resilient energy infrastructure company that is expected to produce stable cash flows through diverse commodity cycles,” ONEOK said in the statement.

The deal is expected to raise the earnings per share (EPS) beginning in 2024 with EPS increase of 3% to 7% per year from 2025 through 2027.

The combined company will own more than 25,000 miles of liquids-oriented pipelines, with significant assets and operational expertise at the Gulf Coast and Mid-Continent market hubs.

“We are fans of consolidation in midstream,” Raymond James analysts wrote in a note to clients commenting on the deal, as carried by Bloomberg.

“We see this as a bold move to redirect the long-term strategy of both companies, propelling the pro forma entity closer to the top of the class from a scale and diversification perspective,” the analysts said.

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