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Plains All American bids for PAA Natural Gas

HOUSTON (AP) -- Oil and gas company Plains All American Pipeline LP said late Tuesday that it has made an all-stock offer to buy the rest of PAA Natural Gas Storage LP, a move it says will strengthen the companies by combining forces during a market downturn.

In recent years, a jump in production has led to a drop in natural gas prices, which has taken a toll on the industry.

"It is difficult to predict the timing and extent of a recovery in natural gas storage market conditions," Greg L. Armstrong, Chairman and CEO of Plains All American, said in a statement. "Accordingly, it is clear that the next several years will be challenging for (PAA Natural Gas) on a stand-alone basis."

Plains All American owns about 28.2 million shares of PAA Natural Gas, which is roughly 46 percent of its outstanding shares. It also owns the company's general partner and incentive distribution rights. The Houston-based company is offering 0.435 shares of its own stock for each full share of PAA Natural Gas. The company said this represents a value of $22.74 per share for PAA Natural Gas, a nearly 8 percent premium to its closing price of $21.09 Tuesday just before the deal was announced.

If successful, PAA Natural Gas would become a unit of Plains All American.

The deal must be approved by the PAA Natural Gas board as well as pass review by a conflicts board.

Plains All American is a publicly traded master limited partnership that transports and markets oil and natural gas. PAA Natural Gas Storage, headquartered in Houston, is a limited partnership that develops, acquires and manages natural gas storage facilities. It currently owns and operates three natural gas storage facilities located in Louisiana, Mississippi and Michigan.

Shares of Plains All American fell 16 cents to close at $51.44 Tuesday. PAA Natural Gas shares added 4 cents to close at $21.09. Both stocks were unchanged in after-hours trading following the news.