Oneok and Magellan Midstream Partners set for $19 billion merger
In a significant development, energy pipeline operators Oneok and Magellan Midstream (NYSE:MMP) Partners have announced their merger in a deal valued at $19 billion. The merger, confirmed during a special meeting of Magellan's shareholders on Thursday, is expected to finalize before the markets open on Monday, September 25, 2023.
The agreement was initially reached in mid-May 2023, despite facing opposition from some of Magellan's stakeholders. Concerns were raised about potential tax implications and doubts over the strategic value of the merger. However, the majority of stakeholders supported the deal, outweighing these objections.
In order to secure the approval for the merger, it required backing from over half of Magellan's outstanding units. With 55% of these units endorsing the deal, this condition was narrowly met; any abstention was effectively considered a vote against the merger. Notably, Magellan managed to overcome opposition from Energy Income Partners, a significant institutional holder that owns 3% of the units.
The deal terms stipulate that Oneok will offer 0.667 of its units and $25 in cash for each Magellan unit. Prior to this announcement, Magellan units were trading around $55 each. As per recent calculations, the deal value aligns with Magellan's trading price at approximately $69.10 per unit.
On Thursday morning following the news announcement, both companies experienced a slight dip in market performance. Magellan Midstream Partners' units saw a minor decrease of 0.1%, bringing their value to $69.02 each. Oneok also experienced a decline as its units slipped 1.3% to $66.13 each.
Magellan's management had previously succeeded in convincing unit holders that the merger would not only provide a significant premium but also result in a more varied and steady business. Preliminary results from the special meeting indicate that about 76% of the common units cast their votes. Out of these, 111.2 million units, or 55% of the total outstanding units, favored the merger. Oneok's stakeholders also expressed strong support for the agreement.
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