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Inergy, L.P. Message Board

  • marklibera marklibera Apr 26, 2012 9:10 AM Flag

    Propane sale math

    First, this deal had to be leaked yesterday. Secoond, here is the math the best I can figure. NRGY unitholders will get .11 share of SPH trading at $43 or about $4.73. NRGY will get another $200mm or $1.60 for each unit, but that won't be distributed. Each NRGY unit will still own about $8 in NRGM shares per NRGY unit. Bottomline, I don't think this is a premium transaction, but it doesn't account for the reduction of debt. NRGY's debt will follow the propane business to SPH, so NRGY will be almost debt free.

    I'm not sure what NRGY will have left in terms of a business other than the assets that they were planning on dropping into NRGM. I would think that they would merge the two entities later down the road.

    As for the distribution cut, many of the predictions were close, but it doesn't seem to matter any longer.

    One thing to watch out for is what the tax consequences will be to a NRGY unitholder. Since NRGY unitholders are getting SPH units, there might not be any gain, but I would look for that in the disclosure materials. One would not like to get a surprise taxable event on next year's K-1.

    Will be interesting to see the market reaction this morning. My guess is that the sale mutes the dividend cut. There might be some kind of arbitrage opportunity between NRGY and NRGM going forward.

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