Crude oil and refined product pipeline operator Magellan Midstream Partners has said that it believes its planned sale to US gas company Oneok will go ahead, despite dissent from some shareholders.
Magellan CEO Aaron Milford told Reuters that he believes the votes on the takeover motions will pass. The company’s fourth-largest shareholder, the 3.1%-holding Energy Income Partners (EIP), had stated that it would vote against any deal as it would see them lose tax benefits.
It came after the Oneok board announced the filing of definitive proxy materials for its takeover of Magellan with the US Securities and Exchange commission, effectively providing all the details of prospective takeover. Oneok’s board of directors recommended all Oneok shareholders vote for the deal.
Magellan is currently a master limited partnership, a form of corporate structure open to natural resource companies that combines the tax benefits of a private company with the liquidity of a public company. As such the company does not pay any tax at company level, a status that EIP wishes to preserve. Milford, though, argued that the benefits of the deal would outweigh this.
“We expect to get the vote, as the value proposition is too compelling. The benefits far outweigh that [tax] cost,” Milford stated.
The $18.8bn deal will see Magellan shareholders receive $25 and 0.6670 shares of Oneok stock in exchange for each Magellan share. The total enterprise value of the combined companies will be $60bn. Oneok will also take on the $5bn of debt that Magellan has accrued.
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By GlobalDataOneok has only previously transported natural gas and natural gas liquids, making Magellan its first foray into crude and refined oil transports. Magellan’s projects include the 885km-long Saddlehorn Grand Mesa onshore pipeline in the US.
