Shares of Magellan Midstream Partners LP (NYSE: MMP) opened 15% up on Monday after Oneok Inc (NYSE: OKE) said it will buy the petroleum products distributor for $18.8 billion.
What’s in it for Magellan shareholders?
The transaction is expected to complete in the third quarter of the current year and will create an oil and gas infrastructure giant with a pipeline network spanning over 50,000 miles.
Magellan shareholders will receive $25 a share in cash and the remaining 63% will be paid to them in Oneok stock. The press release reads:
This acquisition creates a more resilient energy infrastructure company that is expected to produce stable cash flows through diverse commodity cycles.
Versus the start of the year, Magellan Midstream stock is up roughly 25% at writing.
What’s in it for Oneok Inc?
Oneok expects the acquisition to boost its annual per-share earnings by 3.0% to 7.0% from 2025 through 2027. According to its CEO – Pierce H. Norton II:
Our expanded products platform will present opportunities in our core businesses and enhance our ability to participate in energy transformation with increased presence in sustainable fuel and hydrogen corridors.
The Oklahoma-headquartered firm also sees the deal to translate into a 20% increase (at least) in its average annual free cash flow on a per share basis. Oneok will also assume $5.0 billion of debt that Magellan has on its balance sheet as part of today’s agreement.
Unlike Magellan, oil and gas stock Oneok Inc lost nearly 10% on Monday.
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