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ONEOK (NYSE:OKE) will pay $25 and 0.6670 shares of ONEOK common stock for each outstanding Magellan common unit, representing a premium of 22% based on Magellan’s close on May 12.
The deal will give ONEOK access to Magellan’s fee-based refined products and crude oil transportation business, which is expected to create significant free cash flow due to low expenditure requirements, the statement said.
“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,” ONEOK CEO Pierce H. Norton II said in a statement.
The deal is expected to be accretive to earnings per share beginning in 2024, with EPS accretion of 3% to 7% per year from 2025 through 2027.
ONEOK has secured $5.25 billion in fully committed bridge financing for the deal, the statement added.
Magellan will be merged into a wholly owned subsidiary of ONEOK, with Norton continuing to serve as chief executive officer of the combined company. ONEOK said it intends to seek and nominate one or two directors on the board of Magellan’s general partner.
The deal is expected to close in the third quarter of 2023.
Goldman Sachs & Co (NYSE:GS) LLC is serving as lead financial advisor to ONEOK and Goldman Sachs Bank USA is providing fully committed bridge financing. Morgan Stanley & Co LLC (NYSE:MS) is serving as financial advisor to Magellan.
