--Plains offers SemGroup shareholders $1 billion after SemGroup
board rejects offer
--Offer is latest in a spate of pipeline company consolidation
attempts
--Plains says it has pursued SemGroup for several years
Updates with details throughout)
By Ben Lefebvre
Plains All American Pipeline LP (PAA) on Monday said it's
pursuing a $1-billion hostile takeover of SemGroup Corp. (SEMG)
after repeated rejections, in the midst of a consolidation spurt
raging through the pipeline industry.
As new drilling technology has unlocked new supplies of oil and
natural gas throughout the U.S., reshaping the geography of energy
production and transportation, pipeline companies are being forced
to expand the reach of their systems.
KinderMorgan Inc. (KMI) last week announced it would pay $21.1
billion for natural gas pipeline operator El Paso Corp. (EP), while
Southern Union Co. (SUG) shareholders are preparing to vote whether
to approve a $5.7-billion bid from Energy Transfer Equity L.P.
(ETE) made over the summer.
Plains said it had made multiple offers for SemGroup in the past
several years, the latest being on Oct. 6 for $24 a share cash, a
16% premium over SemGroup's 10-day average closing price as of Oct.
5.
Plains, based in Houston, controls about 16,000 miles of crude
oil and refined fuel pipelines stretching from western Canada to
West Texas and the Gulf of Mexico.
"We are disappointed that SemGroup's board of directors has
refused to engage in constructive discussions with us regarding a
possible transaction," Chairman and Chief Executive Greg L.
Armstrong said in a letter to SemGroup. Plains said it started
bidding for SemGroup in March 2010 with a proposal of $17 a
share.
Plains said it was making its latest letter to SemGroup public
to inform stockholders and other stakeholders of the proposal and
its commitment to completing a transaction.
Based in Tulsa, Okla., SemGroup operates 2,400 miles of crude
oil, natural gas, refined fuels and natural gas liquids pipelines
stretching from Canada to South Texas and Mexico. It also controls
oil storage terminals totaling 18.4 million barrels a day. The
company, which emerged from bankruptcy in late 2009, posted a
second-quarter net loss of $12.3 million on revenue of $344.2
million.
According to SemGroup's most recently quarterly filing, it had
41.7 million shares of Class A and Class B stock outstanding.
A message seeking comment from SemGroup wasn't returned
immediately.
Shares in SemGroup were up 19.4% at $28.12 premarket, above
Plains's offer price, while Plains shares were up 0.8% to
$64.38.
-By Ben Lefebvre, Dow Jones Newswires; 713-547-9201;
ben.lefebvre@dowjones.com
-Joan E. Solsman contributed to this article