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Crosstex Energy, Inc. Message Board

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  • geoequities geoequities Jun 19, 2006 4:27 PM Flag

    RE: MBO discussion on XTEX board

    hrbrown, it has nothing to do with what you say. It has everything to do with the fundamental difference between LP and GP: you wouldn't buy out the whole of something if you could not manage it.

    That is why -under normal circumstances- you would never buy the LP without the GP or why you would buy the GP and leave the LP as-is.

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    • You don't take the MLP private because you need the MLP as a means to constantly tap the equity markets. Any time you see an MLP and the GP being bought, the GP is almost always bought by the other MLP(and essentially dissolved) and usually bought with cash. The MLP that is being acquired usually has its MLP units converted to the acquiring MLP's units. Look when KMP acquired Sante Fe Partners and its privately held GP, look at EPD's acquisition of GTM and its GP, look at VLI's acquisition of KPP and KSL(the GP), look at PAA's acquisition of PPX and its privately held GP.

      As geo points out, the GP is the key to the MLP, you would shoot yourself in the foot if you took the MLP private, because that would eliminate cheap equity, furthermore, you have to have control of the GP to be able to grow the MLP.

      For this reason, I suspect that if you are looking for premiums, the real premiums will come from owning a GP that is being bought, not by holding the MLP. Exceptions occur, for example, TLP has been on a tear since SemGroup and Morgan Stanley are dueling it out for control of TMG (the GP). Obviously, it favors TLP for SemGroup to win, but either way, TLP has gained.

      • 2 Replies to rrb1981
      • There is also an "abnormal" case, of taking over the MLP and voting out the GP. Theoretically possible; I don't know if it ever got applied. I am not sure about all that happened at SGU.

      • Maybe I wasn't wasn't clear or mis-typed, but I wasn't at all suggesting that the mlp would get bought. Clearly the value is in the GP and that is what a buyer really wants, but if someone were to buy XTXI, they would be (at least to start with) get XTEX units as part of XTXI.

        What I meant was they could trickle the XTEX units into the market or as a secondary to pay down debt used to purchase XTXI.

        That said, I still think XTXI is the best "target" out there for the reasons in my previous posting. However, I'm not holding it as a takeover candidate, but rather as an ongoing interest as-is.

 
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