(Bloomberg) – On a day when the largest oil rally in more than a decade fueled most US energy stocks, billionaire Kelcy Warren's plan to acquire a rival erased the market value of its pipeline giant from $ 1.5 billion.
According to a statement, the offer of $ 17 per share equates to a 65% premium on the closing price of the SemGroup on Friday. The value of the $ 1.35 billion cash-and-stock deal increases to $ 5 billion, including debt. The SemGroup gained 61% on Monday while the counterparty fell 4.2%.
For deal-hungry Warren, the transaction is its latest on a consolidation course that included the pursuit of NuStar GP Holdings LLC last year, which staggered at the time the target was rejected.
Energy Transfer was one of the only pipeline operators to experience a fall on a day when oil prices rose the most in a decade following an attack on a Saudi Arabian crude oil processing facility. Recent reports on portfolio management, capital discipline and on accelerated debt reduction have turned drastically, "said analysts of Tudor Pickering Holt & Co. in a note to customers. Occidental Petroleum Corp. and Callon Petroleum Co. crashed after announcing Anadarko Petroleum Corp. and Carrizo Oil & Gas Inc.
Both buyers have knocked on disgruntled billionaires: Carl Icahn urges Occidental to sell The combined company, while John Paulson calls Callon to cancel the deal and put up for sale.
Energy Transfer, due to its structure as a Master Limited Partnership, a model used by many pipeline companies, is unlikely to attract an activist investor shields investors from certain taxes, but also has fewer rights for ordinary shareholders.
Not all analysts liked the SemGroup business. While Sanford C. Bernstein's research team said investors are likely to be "disappointed," analysts led by Jean Ann Salisbury said they "do not consider this deal a disaster" because of cost savings of $ 170 million who are seeking energy transfer, are "feasible".
Warren, who built his empire and built small pipeline companies as the shale boom exploded, signaled for the first time that he could resume the purchase in August 2018. That was only eight days after the company announced it. A streamlining in part meant an improvement in stock performance.
"We kiss many frogs in search of a prince," Warren said during a November conference call. "We work hard on it. However, I will tell you that we can not find deals. "
Dealmaking was a touchy subject for Warren since Energy Transfer of a $ 33 billion contract to buy Williams Cos. Abandonment that would have been his biggest acquisition The SemGroup crude oil and product terminal on the Houston Ship Channel is likely the reason for Energy Transfer's decision to buy the company, Michael Blum of Wells Fargo Securities said Monday in a note. Yet, "many of the other assets do not seem to fit ET's footprint and are of lower quality, and we would not be surprised if ET sold some of the assets," he said.
Energy Transfer is already seeking to sell a 33 percent stake in the Rover pipeline, which will ship Appalachian natural gas to customers in the Midwest.
"Starting at 30,000 feet" in a market where investors are pushing companies to cut spending We're not sure this transaction can be completed with enthusiasm when it comes to leveraging and free cash flow increase. "
Energy Transfer is expected to be scrutinized by investors The asset mix and merits of the transaction may well be our accretion litmus test at first glance," Citigroup Inc. analyst Timm wrote Schneider in a note to the customers.
"We wish we could ask some questions, but there is no conference call," Schnei said.
While Energy Transfer offers a high takeover fee, Tulsa-based SemGroup lost more than half of its stock last year. The company had previously worked with a consultant on alternative options for raising capital, as was known earlier this year.
For the SemGroup, the deal "provides a nice exit ramp for the company following a strategic strategy. A review that could have gone in many directions," said Blum of Wells Fargo.
Jefferies LLC acted as exclusive financial advisor to SemGroup, while Bank of America advised Merrill Lynch Energy Transfer.
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