MarkWest to seek EMG's stake in venture for $1.8B

MarkWest seeks to close $1.8 billion buyout of partner's stake in gas-processing joint venture

Associated Press

DENVER (AP) -- MarkWest Energy Partners LP said Monday it is close to buying The Energy & Minerals Group's 49 percent stake in a natural gas-processing joint venture for about $1.8 billion in cash and stock.

To raise money for the deal, MarkWest launched a public offering of 8 million units and gave underwriters an option to buy up to 1.2 million additional units.

MarkWest said it signed a letter of intent with EMG saying they will negotiate toward a final agreement for the sale of EMG's stake in MarkWest Liberty Midstream & Resources LLC. They expect to close the deal by Dec. 31.

MarkWest would pay $1 billion in cash and 19.95 million unregistered shares of class B stock that EMG, which manages private equity funds, could convert by July 2017 into common shares.

At Monday's closing price, those shares could be worth $1.12 billion. However, EMG's voting power would be limited to 5 percent and it would face limits on distributing the common shares. MarkWest said on a conference call that the current value of the shares should be discounted to a range between $750 million and $800 million.

MarkWest said the deal would increase distributable cash flow next year and increase it by up to 6 percent in later years.

The company raised its outlook for 2012 distributable cash flow to between $480 million and $540 million and boosted expected 2012 capital spending to between $900 million and $1.3 billion. MarkWest also expects to raise its fee-based net operating margin by up to 6 percent per year.

Last month, the company predicted 2012 distributable cash flow of $380 million to $440 million.

The MarkWest Liberty joint venture was formed about three years ago to serve gas producers in the Marcellus shale formation of the Eastern United States.

The companies said they intend to form a new joint venture in the Utica shale field of eastern Ohio next year. EMG would provide most of the upfront capital. The companies they would provide more details in early January.

Shares of MarkWest rose 4 cents to close at $56.11. After the potential EMG deal and equity offering were announced, the shares fell $1.91, or 3.4 percent, to $54.20 in extended trading.

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