Midstream player ONEOK has struck a deal to acquire all outstanding units of rival Magellan Midstream Partners LP in a cash-and-stock transaction valued at approximately $18.8 billion, including assumed debt. The combined company will have a total enterprise value of $60 billion.
Under the terms of the deal, Magellan will be merged into a newly created 100% wholly owned subsidiary of ONEOK. The transaction is expected to close in the third quarter of 2023 and has been unanimously approved by the board of directors of both companies. ONEOK has secured $5.25 billion in fully committed bridge financing for the proposed cash consideration.
“ONEOK has a long history and track record of being at the forefront of transformational transactions,” said Pierce H. Norton II, ONEOK president and chief executive. “The combination of ONEOK and Magellan will create a diversified North American midstream infrastructure company with predominately fee-based earnings, a strong balance sheet and significant financial flexibility focused on delivering essential energy products and services to our customers and continued strong returns to investors. Our expanded products platform will present further opportunities in our core businesses as well as enhance our ability to participate in the ongoing energy transformation with an increased presence in sustainable fuel and hydrogen corridors.”
The combined company will own more than 25,000 miles of liquids-oriented pipelines, with assets at the Gulf Coast and Mid-Continent market hubs. ONEOK anticipates this combined liquids-focused portfolio will present potential for enhanced customer product offerings and increased international export opportunities. The company said the deal could potentially result in total annual transactions exceeding $400 million within 2 to 4 four years.
“The acquisition of Magellan’s vast refined products network will broaden and reinforce ONEOK’s business model, boost its scale and diversification, reduce volatility in earnings, and deliver improved returns and profitability through optimization,” said Elena Nadtotchi, senior vice president from Moody’s Investors Service. "The use of significant equity funding and ONEOK’s focus on post-acquisition debt reduction will maintain its solid leverage profile.”
Magellan’s assets include a 9,800-mile refined products pipeline system stretching across 15 states from Texas to North Dakota with 54 connected terminals and two marine storage terminals.
In addition, the company owns approximately 2,200 miles of crude oil pipelines, a condensate splitter, and storage facilities with an aggregate storage capacity of about 39 million bbl, of which 29 million are used for contract storage. Approximately 1,000 miles of these pipelines, the condensate splitter, and 31 million bbl of this storage capacity (including 25 million bbl used for contract storage) are wholly owned, and the remainder is owned through joint ventures.
The closing of the transaction is subject to customary closing conditions, including the approvals of both ONEOK shareholders and Magellan unitholders, as well as US antitrust clearance.
