Energy Transfer LP (ET) has announced that it has entered into a definitive merger agreement whereby Energy Transfer will acquire SemGroup Corp. in a unit and cash transaction valued at US$17 per share, or a total consideration including the assumption of debt of approximately US$5 billion, based on the closing price of ET common units on 13 September 2019.
The merger consideration consists of US$6.80 in cash and 0.7275 of an ET common unit for each outstanding share of Class A Common Stock of SemGroup, or 40% cash and 60% equity. This represents a 65% premium to the closing price of SemGroup shares as of 13 September 2019. The transaction is expected to close in late 2019 or early 2020, subject to the approval by SemGroup’s stockholders and other customary regulatory approvals. Upon the closing, SemGroup stockholders are expected to own approximately 2.2% of Energy Transfer’s outstanding common units.
The acquisition of SemGroup is expected to increase ET’s scale across multiple regions and provide increased connectivity for the company’s crude oil and NGL transportation businesses.
ET will strengthen its crude oil transportation, terminalling and export capabilities with the addition of the Houston Fuel Oil Terminal, a crude oil terminal on the Houston Ship Channel with 18.2 million bbl of crude oil storage capacity, five deep-water ship docks and seven barge docks. This terminal is supported by stable take-or-pay cash flows from diverse, primarily investment grade customers. To enhance this optionality, ET also announced plans to construct a new crude oil pipeline, the Ted Collins Pipeline, to connect the Houston Fuel Oil Terminal to ET’s Nederland Terminal.
This acquisition also expands ET’s crude oil and NGL infrastructure by adding crude oil gathering assets in the DJ Basin in Colorado and the Anadarko Basin in Oklahoma and Kansas, as well as crude oil and natural gas liquids pipelines connecting the DJ Basin and Anadarko Basin with crude oil terminals in Cushing, Oklahoma. ET’s crude oil assets on the Gulf Coast will also benefit from the Maurepas Pipeline and its connections to the St. James refining complex. The acquisition will also provide a crude oil gathering and transportation presence in the Alberta Basin in western Canada.
The combination of Energy Transfer’s significant infrastructure with SemGroup’s complementary assets will allow the combined company to pursue additional commercial opportunities and to achieve cost savings while enhancing Energy Transfer’s ability to serve customers.
The combined company expects to generate more than US$170 million of annual run-rate synergies, consisting of commercial and operational synergies of US$80 million, financial savings of US$50 million and cost savings of US$40 million.
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