(ENTERPRISE, PRODUCTS, TEPPCO, PIPELINE, NATURAL, WOULD)
NEW YORK (Reuters) - Enterprise Products Partners LP (EPD.N) said on Monday that Teppco Partners LP (TPP.N) had accepted a sweetened $3.3 billion takeover bid in a deal that will form the largest publicly-traded U.S. pipeline network.
The transaction, which requires the approval of Teppco unit-holders as well as regulatory clearance, is expected to close sometime in the fourth quarter, Enterprise said.
The announcement of the deal, which will form a 48,000-mile network of pipelines transporting crude, refined products and natural gas, sent Teppco units up 5 percent to close at $30.12 on the New York Stock Exchange. Enterprise Products slipped 1.3 percent to $24.96.
Both companies are master limited partnerships run by general partners owned by the same entity, Enterprise GP Holdings LP (EPE.N). Enterprise Products is controlled by Dan Duncan, Houston`s richest man, and a partnership controlled by Duncan bought a significant stake in Teppco in 2005.
Analysts said the merger is a step toward Duncan consolidating control over existing North American oil and gas pipeline networks.
"This reflects the growing importance of the oil and gas transportation industry," said Antoine Halff, vice president of research for the Newedge Group. "Oil and gas transport are increasingly linked to each other.
"Not just because some consumers are switching from oil to gas, but also because the oil industry itself has become a very large natural gas and natural gas liquids consumer."
Under an exchange of units, Enterprise will pay the equivalent of $31.36 per unit of Teppco, a premium of 9.3 percent over Friday`s closing price. In April, Teppco had rejected a proposed $2.75 billion takeover offer from Enterprise.
Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.
"It will become the largest partnership and with that it increases its scale of opportunities and will have a lower cost of capital," said analyst Ralph Pellechia with Fitch Ratings.
"The new partnership would transport a full range of products including oil. It will gain storage capacity, which has been profitable because of a contango in oil markets," he said. "Even when storage isn`t as profitable, the partnership will own pipelines to transport the crude."
William Eddleman, of Argus Research in Houston, said there was a 90-percent chance of the deal going through. "The only thing that might stand in the way ... is if the Department of Justice decides to look at it for antitrust issues.
"It really becomes a huge consortium. It would probably be bigger than Kinder Morgan (KMP.N) and the market would be made up of two giants," he said.
He noted Enterprise is primarily a natural gas and natgas liquids pipeline and storage company so this would expand it into the oil business and into refined chemicals too.
"It creates a giant with extensive penetration into the Northeast, Midwest and other regions," he said. Continued...
Original article
Related articles:
Enterprise Partners to buy Teppco for $3.3 billion
No comments:
Post a Comment