Brings together two premier energy
infrastructure businesses with strong returns on invested capital
and diverse free cash flow generation
Expect to achieve immediate financial
benefits, including cost, operational and tax synergies, supporting
meaningful expected accretion
Compelling long-term value proposition driven
by consistent and disciplined capital allocation philosophy
Complementary and diversified asset positions
with potential for additional cost and commercial synergies over
time
Strong investment-grade credit ratings with
enhanced scale and diversification
TULSA,
Okla., May 14, 2023 /PRNewswire/ -- ONEOK, Inc.
(NYSE: OKE) ("ONEOK") and Magellan Midstream Partners, L.P. (NYSE:
MMP) ("Magellan") today announced that they have executed a
definitive merger agreement under which ONEOK will acquire all
outstanding units of Magellan in a cash-and-stock transaction
valued at approximately $18.8 billion
including assumed debt, resulting in a combined company with a
total enterprise value of $60.0
billion. The consideration will consist of $25.00 in cash and 0.6670 shares of ONEOK common
stock for each outstanding Magellan common unit, representing a
current implied value to each Magellan unitholder of $67.50 per unit, for a 22% premium, based on
May 12, 2023 closing prices.
STRATEGIC RATIONALE:
- Brings together two premier energy infrastructure businesses
with strong returns on invested capital and diverse free cash flow
generation: The transaction adds a leading, and primarily
fee-based, refined products and crude oil transportation business
to ONEOK. Magellan's stable, primarily demand-driven businesses are
expected to generate significant free cash flow due to low capital
expenditure requirements. This acquisition creates a more resilient
energy infrastructure company that is expected to produce stable
cash flows through diverse commodity cycles.
- Expect to achieve immediate financial benefits, including
cost, operational and tax synergies, supporting meaningful expected
accretion: The transaction is expected to be earnings per share
(EPS) accretive beginning in 2024 with EPS accretion of 3% to 7%
per year from 2025 through 2027, and free cash flow per share
accretion averaging more than 20% from 2024 through 2027. Base
forecasted synergies are expected to total at least $200 million annually.
From a tax perspective, ONEOK expects to benefit from the step-up
in Magellan's tax basis from the transaction, thus deferring the
expected impact of the new corporate alternative minimum tax from
2024 to 2027. The benefit from the basis step-up has an estimated
total value of approximately $3.0
billion, which has an estimated net present value of
approximately $1.5 billion.
Utilization of expected tax attributes could increase if additional
capital projects are put into service or acquisitions are
completed, which may increase the net present value of future tax
deferrals.
- Compelling long-term value proposition driven by consistent
and disciplined capital allocation philosophy: The combined
company is expected to experience a step change in free cash flow
after dividends and growth capital by generating an average annual
amount of approximately $1.0 billion
in the first four years following the expected transaction close.
The increase in free cash flow will provide additional cash for
debt reduction, growth capital and value returned to shareholders
through dividends and/or repurchasing shares. ONEOK remains
committed to growing both EPS and its common dividend while
targeting a payout ratio of less than 85%.
- Complementary and diversified asset positions with potential
for additional cost and commercial synergies over time: The
combined company will own more than 25,000 miles of
liquids-oriented pipelines, with significant assets and operational
expertise at the Gulf Coast and Mid-Continent market hubs. ONEOK
anticipates this combined liquids-focused portfolio will present
significant potential for enhanced customer product offerings and
increased international export opportunities. We believe these
activities could potentially result in total annual transaction
synergies exceeding $400 million
within two to four years.
- Strong investment-grade credit ratings with enhanced scale
and diversification: The combined company expects pro-forma
2024 year-end net debt-to-EBITDA of approximately 4.0 times. ONEOK
expects leverage to decrease below 3.5 times by 2026 as future
growth projects are placed in service. Excluding certain large
projects that have not yet received a final investment decision
from the expected net debt-to-EBITDA calculation would accelerate
the timeframe to achieve 3.5 times by approximately one year.
CEO PERSPECTIVE:
"ONEOK has a long history and track record of being at the
forefront of transformational transactions. 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," said Pierce H. Norton
II, ONEOK president and chief executive officer. "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. We are excited about the
future of our combined companies and look forward to welcoming
Magellan's well-respected employees to ONEOK," added Norton.
"Throughout more than 20 years as a publicly traded company,
Magellan has remained focused on safe and responsible operations,
financial discipline and long-term investor value. We believe ONEOK
shares these priorities, and we are pleased to join them in
creating a stronger, more diversified midstream company," said
Aaron Milford, Magellan president
and chief executive officer. "We believe the premium offered
maximizes value creation for Magellan's unitholders and reflects
the essential nature of Magellan's assets and service offerings as
well as the quality of our talented and innovative employees. This
transaction provides a significant upfront cash component and an
opportunity for Magellan investors to benefit from the attractive
cash dividend offered by the combined company going forward."
TRANSACTION DETAILS:
Magellan will be merged into a newly created 100% wholly-owned
subsidiary of ONEOK.
Each Magellan unitholder will receive $25.00 in cash and 0.6670 shares of ONEOK stock
per unit. This represents a 22% premium to the Magellan closing
price on May 12, 2023.
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. The closing of the transaction is subject to
customary closing conditions, including the approvals of both ONEOK
shareholders and Magellan unitholders, as well as Hart Scott Rodino
Act clearance.
Following the close of the transaction, Pierce Norton will continue to serve as chief
executive officer of the combined company. ONEOK intends to seek
and nominate one or two director(s) serving on the board of
Magellan's general partner.
TAX IMPLICATIONS:
The transaction will be a taxable event for Magellan unitholders
and will cause ONEOK to have a step-up in tax basis approximately
equal to the aggregate purchase price of Magellan units and
Magellan debt assumed (approximately $18.8
billion). The premium and cash portion of the consideration
may assist with potential tax implications for Magellan unitholders
occurring from this transaction. This transaction is expected to
defer significant corporate cash tax liability into future periods
for the combined entity.
CONFERENCE CALL INFORMATION:
ONEOK's chief executive officer and chief financial officer,
along with Magellan's chief executive officer, will host a
conference call on Monday, May 15 at
8:30 a.m. Eastern Daylight Time
(7:30 a.m. Central Daylight Time) to
discuss the transaction.
To participate in the telephone conference call, dial
877-883-0383, entry number 9948090 or log on to ONEOK's Investor
Relations website https://ir.oneok.com/ under "Events &
Presentations" or Magellan's website at
www.magellanlp.com/investors/webcasts.aspx.
A replay will be made available on both websites for seven days
and may be accessed at 877-344-7529, access code 4668799.
TRANSACTION PRESENTATION:
Additional information that will be discussed on the conference
call is accessible by selecting the link below.
https://ir.oneok.com/news-and-events/events-and-presentations
ADVISORS:
Goldman Sachs & Co. LLC is serving as lead financial advisor
to ONEOK and Goldman Sachs Bank USA is providing fully committed bridge
financing. BofA Securities and TPH&Co., the energy business of
Perella Weinberg Partners, also advised ONEOK. Kirkland & Ellis
LLP is serving as ONEOK's legal advisor.
Morgan Stanley & Co. LLC is serving as financial advisor to
Magellan. Latham & Watkins LLP and Richards, Layton &
Finger, P.A. are acting as Magellan's legal advisors.
ABOUT ONEOK:
ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is a leading
midstream service provider and owns one of the nation's premier
natural gas liquids (NGL) systems, connecting NGL supply in the
Rocky Mountain, Permian and Mid-Continent regions with key market
centers and owns an extensive network of gathering, processing,
fractionation, transportation and storage assets. More information
is available at www.oneok.com.
ONEOK is a FORTUNE 500 company and is included in the S&P
500.
ABOUT MAGELLAN MIDSTREAM PARTNERS:
Magellan Midstream Partners, L.P. (NYSE: MMP) is a publicly
traded partnership that primarily transports, stores and
distributes refined petroleum products and crude oil. Magellan owns
the longest refined petroleum products pipeline system in the
country, with access to nearly 50% of the nation's refining
capacity, and can store more than 100 million barrels of petroleum
products such as gasoline, diesel fuel and crude oil. More
information is available at www.magellanlp.com.
IMPORTANT ADDITIONAL INFORMATION AND WHERE TO FIND
IT:
In connection with the proposed merger (the "Proposed
Transaction") between ONEOK and Magellan, ONEOK intends to file
with the Securities and Exchange Commission (the "SEC") a
registration statement on Form S-4 (the "Registration Statement")
to register the shares of ONEOK's common stock to be issued in
connection with the Proposed Transaction. The Registration
Statement will include a document that serves as a prospectus of
ONEOK and joint proxy statement of ONEOK and Magellan (the "joint
proxy statement/prospectus"), and each party will file other
documents regarding the Proposed Transaction with the SEC.
INVESTORS AND SECURITY HOLDERS OF ONEOK AND MAGELLAN ARE URGED
TO CAREFULLY AND THOROUGHLY READ, WHEN THEY BECOME AVAILABLE, THE
REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS, AS
EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER
RELEVANT DOCUMENTS FILED BY ONEOK AND MAGELLAN WITH THE SEC BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT ONEOK AND MAGELLAN,
THE PROPOSED TRANSACTION, THE RISKS RELATED THERETO AND RELATED
MATTERS.
After the Registration Statement has been declared effective, a
definitive joint proxy statement/prospectus will be mailed to
shareholders of ONEOK and unitholders of Magellan. Investors will
be able to obtain free copies of the Registration Statement and the
joint proxy statement/prospectus, as each may be amended from time
to time, and other relevant documents filed by ONEOK and Magellan
with the SEC (when they become available) through the website
maintained by the SEC at www.sec.gov. Copies of documents filed
with the SEC by ONEOK, including the joint proxy
statement/prospectus (when available), will be available free of
charge from ONEOK's website at www.oneok.com under the "Investors"
tab. Copies of documents filed with the SEC by Magellan, including
the joint proxy statement/prospectus (when available), will be
available free of charge from Magellan's website at
www.magellanlp.com under the "Investors" tab.
PARTICIPANTS IN THE SOLICITATION:
ONEOK and certain of its directors, executive officers and other
members of management and employees, Magellan, and certain of the
directors, executive officers and other members of management and
employees of Magellan GP, LLC, which manages the business and
affairs of Magellan, may be deemed to be participants in the
solicitation of proxies from ONEOK's shareholders and the
solicitation of proxies from Magellan's unitholders, in each case
with respect to the Proposed Transaction. Information about ONEOK's
directors and executive officers is available in ONEOK's Annual
Report on Form 10-K for the 2022 fiscal year filed with the SEC on
February 28, 2023, and its definitive
proxy statement for the 2023 annual meeting of stockholders filed
with the SEC on April 5, 2023, and in
the joint proxy statement/prospectus (when available). Information
about Magellan's directors and executive officers is available in
its Annual Report on Form 10-K for the 2022 fiscal year and its
definitive proxy statement for the 2023 annual meeting of
unitholders, each filed with the SEC on February 21, 2023, and the joint proxy
statement/prospectus (when available). Other information regarding
the participants in the solicitations and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the Registration Statement, the joint proxy
statement/prospectus and other relevant materials to be filed with
the SEC regarding the Proposed Transaction when they become
available. Shareholders of ONEOK, unitholders of Magellan,
potential investors and other readers should read the joint proxy
statement/prospectus carefully when it becomes available before
making any voting or investment decisions.
NO OFFER OR SOLICITATION:
This communication is not intended to and shall not constitute
an offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
FORWARD-LOOKING STATEMENTS:
This communication contains "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical fact,
included in this communication that address activities, events or
developments that ONEOK or Magellan expects, believes or
anticipates will or may occur in the future are forward-looking
statements. Words such as "estimate," "project," "predict,"
"believe," "expect," "anticipate," "potential," "create," "intend,"
"could," "would," "may," "plan," "will," "guidance," "look,"
"goal," "future," "build," "focus," "continue," "strive," "allow"
or the negative of such terms or other variations thereof and words
and terms of similar substance used in connection with any
discussion of future plans, actions, or events identify
forward-looking statements. However, the absence of these words
does not mean that the statements are not forward-looking. These
forward-looking statements include, but are not limited to,
statements regarding the Proposed Transaction, the expected closing
of the Proposed Transaction and the timing thereof and as adjusted
descriptions of the post-Transaction company and its operations,
strategies and plans, integration, debt levels and leverage ratio,
capital expenditures, cash flows and anticipated uses thereof,
synergies, opportunities and anticipated future performance,
including maintaining current ONEOK management, enhancements to
investment-grade credit profile, an expected accretion to earnings
and free cash flow, dividend payments and potential share
repurchases, increase in value of tax attributes and expected
impact on EBITDA. Information adjusted for the Proposed Transaction
should not be considered a forecast of future results. There are a
number of risks and uncertainties that could cause actual results
to differ materially from the forward-looking statements included
in this communication. These include the risk that ONEOK's and
Magellan's businesses will not be integrated successfully; the risk
that cost savings, synergies and growth from the Proposed
Transaction may not be fully realized or may take longer to realize
than expected; the risk that the credit ratings of the combined
company or its subsidiaries may be different from what the
companies expect; the possibility that shareholders of ONEOK may
not approve the issuance of new shares of ONEOK common stock in the
Proposed Transaction or that shareholders of ONEOK or unitholders
of Magellan may not approve the Proposed Transaction; the risk that
a condition to closing of the Proposed Transaction may not be
satisfied, that either party may terminate the Merger Agreement or
that the closing of the Proposed Transaction might be delayed or
not occur at all; potential adverse reactions or changes to
business or employee relationships, including those resulting from
the announcement or completion of the Proposed Transaction; the
parties do not receive regulatory approval of the Proposed
Transaction; the occurrence of any other event, change or other
circumstances that could give rise to the termination of the Merger
Agreement relating to the Proposed Transaction; the risk that ONEOK
may not be able to secure the debt financing necessary to fund the
cash consideration required for the Proposed Transaction; the risk
that changes in ONEOK's capital structure and governance could have
adverse effects on the market value of its securities; the ability
of ONEOK and Magellan to retain customers and retain and hire key
personnel and maintain relationships with their suppliers and
customers and on ONEOK's and Magellan's operating results and
business generally; the risk the Proposed Transaction could
distract management from ongoing business operations or cause ONEOK
and/or Magellan to incur substantial costs; the risk that ONEOK may
be unable to reduce expenses or access financing or liquidity; the
impact of the COVID-19 pandemic, any related economic downturn and
any related substantial decline in commodity prices; the risk of
changes in governmental regulations or enforcement practices,
especially with respect to environmental, health and safety
matters; and other important factors that could cause actual
results to differ materially from those projected. All such factors
are difficult to predict and are beyond ONEOK's or Magellan's
control, including those detailed in ONEOK's Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K that are available on ONEOK's website at www.oneok.com and on
the website of the Securities and Exchange Commission (the "SEC")
at www.sec.gov, and those detailed in Magellan's Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K that are available on Magellan's website at
www.magellanlp.com and on the website of the SEC. All
forward-looking statements are based on assumptions that ONEOK and
Magellan believe to be reasonable but that may not prove to be
accurate. Any forward-looking statement speaks only as of the date
on which such statement is made, and neither ONEOK nor Magellan
undertakes any obligation to correct or update any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by applicable law. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof.
CONTACTS:
ONEOK, Inc.
Investor Relations:
Andrew Ziola
Phone: (918) 588-7683
ONEOKInvestorRelations@oneok.com
Media Relations:
Brad Borror
Phone: (918) 588-7582
brad.borror@oneok.com
Magellan Midstream Partners, L.P.
Investor Relations:
Paula Farrell
Phone: (918) 574-7650
paula.farrell@magellanlp.com
Media Relations:
Bruce Heine
Phone: (918) 574-7010
bruce.heine@magellanlp.com
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SOURCE ONEOK, Inc.