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Inergy Holdings, L.P. (NRGP) Message Board

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  • rrb1981 rrb1981 Aug 9, 2010 11:46 AM Flag

    NRGY to buy NRGP

    You are getting a 59% increase in the distribution if you take a few minutes to do the math.

    You recieve .77 units of NRGY for each NRGP unit that you own. NRGY pays $2.82, so you are getting what amounts to $2.17 whereas you are currently receiving $1.36. That is a 59% increase in income, versus just a minimal increase in capital. NRGP/NRGY is just arbitraging the difference in valuation.

    This is a decent deal for NRGP holders. I would prefer to stay separate to get the better growth, but all good things must come to an end....I made a killing on NRGP, on BGH, on MGG, MWP, KSL, PLX and others that were taken out. The market is very efficient at finding undervalued MLPs and GPs.

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    • Abter, where are you when we need you. There are already three law firms trying to get some of our money.

      • 2 Replies to roypschick
      • I'm trying to sort this all out. Probably got a ways to go, but here are some first thoughts:

        1) its gonna happen...over 50% of NRGP unitholders already agreed. I would just as soon it didn't, but I think I can live with it. Certainly holding on to my NRGP now.

        2) lawsuits dont help anyone but the lawyers involved. This looks like knee jerk ambulance chasing. IMHO it is a bad deal for a current NRGY or NRGP investor to join the suit..you end up paying for the lawyers on both sides, and any cash settlement comes out of a Partnership you already own, gets reduced by 1/3 by the lawyers, and given back to you. Plus your partnership spend money on their (your) lawyers in the meantime.

        3) This makes the recent NRGP split more interesting. Frankly that split never made a whole lot of sense to me (but I think splitting is always a waste of money), but now I suspect the goal was to get the price of NRGP down for some reason related to the merger (so the ratio at .77 is less than 1.0, rather than an equivalent pre-split ratio of ~2.3? why?). I hope there is some good reason...setting up and administrating the split cost real money (which we paid for of course).

        4) RRB's comments about the effect on our distribution is critical. The dist. impact is way more important than the price impact.

        I get different numbers than RRB about the impact on your distribution, but that's because I am looking at 'business as usual' behavior if the merger didn't happen. Here is my quick analysis.

        a) deal won't close until Q4, so the Feb '11 distribution will be the first one we will own 0.77 NRGY units for each one owned, and then we get the NRGY distribution.

        b) By then, with no merger NRGY would have raised their distribution twice (by $.01 each). NRGP would have raised their distribution by 4x the RATE of the NRGY increase. Both are based on history. All that works out to the distributions in Feb '11 would have been .725 for NRGY, and .379 for NRGP.

        c) So by then a current NRGP owner would own .77 units of NRGY, and hence would get 0.77*$.725 = $.558. So their Feb '11 distribution went up by 47% (.558/.379 - 1) over what would havae been.

        4) going further beyond that, the critical issue is NRGY should be able to raise their distribution quicker than they have been because they aren't making the IDR payments. If the NRGY growth rate stays at $0.01/q like it has been, our one time gain in distributions would be ground away over time. If NRGY increases their CAGR, the increased distribution over what would have been will last a longer time. Just how much longer depends on how much better than $0.01/q the NRGY distribution does.

        6) final point relates to some existing insider GP owners agreeing to take PIK units in lieu of the distributions, and those units convert to regular units over a 2 year period. It does seem to make sure the GP insiders have some significant skin in this game. Not sure what the up upshot is.

        Sorry for quick, and probably garbled notes. Will no doubt post more later.

      • <<< There are already three law firms trying to get some of our money.

        I listened in to some of the CC today. It sounded like they did paper this merger up pretty well. It appears the lawyers are just chasing ambulances.

 

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