"Duncan tried to push the deal earlier this year when Teppco shares were down under $20, but the Teppco board rejected the deal. Duncan came back and sweetened the pot by agreeing to forgo four years worth of cash distributions (some $50 million) on a portion of his shares in the combined company--leaving more cash for everybody else.
Reichman notes that this won't be the first time Duncan has agreed to give up some of his own income to make smaller shareholders happy. "Duncan has worked hard to earn the reputation for being shareholder friendly," says Reichman. "His interest is in growing the pie for everyone, not just in grabbing the biggest piece for himself."
450M shares outstanding.. plus 120M shares for TPP = 570M sh outstanding. Divide Mr Duncan's contribution of $12.5M per year by 570M and you get $0.02 per year, per share for his contribution. Forgoing $50M in distributions is good PR, but it amounts to..well, draw your own conclusions.
This $.02 per unit contribution by Mr Duncan may permit EPD to increase its distribution by $.02 per unit per year ($.005 per unit per quarter). By itself, it does not make the transaction an instant success. However, the merger is likely to result in long term strategic benefits. Mr Duncan and EPD have been working toward the goal of acquiring TPP for many years (first having EPE buy the General Partner of TPP).
However, the effect will be for the merger to be accretive to unit holders of EPD almost immediately.
I will gladly take my $.005 per quarter distribution increase (a gift from Mr Duncan) and not complain. I am certain that Mr Duncan would be happy to receive your refund if you feel it is not appropriate.
I am happy to continue with EPD under Mr Duncan's leadership. I am just along for the ride.
The Forbes article is correct. I clipped this from the company website. I hadn't seen this before. Are the "B" shares sellable?
"An affiliate of EPCO, Inc., a private company controlled by Dan L. Duncan, will exchange its 11,486,711 TEPPCO units for 14,243,521 Enterprise units, based on the 1.24 exchange rate, which will consist of 9,723,090 Enterprise common units and 4,520,431 Enterprise Class B units. The Enterprise Class B units will not be entitled to regular quarterly cash distributions for the sixteen quarters following the closing of the merger. The Class B units will convert automatically into the same number of common units on the date immediately following the payment date of the sixteenth distribution following the closing of the merger. The total distributions forgone by the Class B units would be more than $40 million based on expected increases in the cash distribution rate for Enterprise’s common units during this period. The Class B units will be entitled to vote together with the common units as a single class on partnership matters."
Who would buy "B" shares? If they are the same in every way, except they don't have a distribution for 16 quarters, why would anyone buy them when they could, just as easily buy the "A" shares. It would be dumb to willingly forgo the distribution. It is clear to me that Dan Duncan intends to hold them.