The recently announced merger of pipeline operators ONEOK and Magellan Midstream Partners is the biggest deal in the oil and gas sector so far this year, with the $18.8-billion value more than fourfold higher than the biggest deal in April, data from S&P Global Market Intelligence has shown.
The two major pipeline operators said in the middle of May that ONEOK would buy Magellan Midstream Partners in a cash-and-stock deal valued at $18.8 billion, creating a combined U.S. oil and gas pipeline giant with a total enterprise value of $60 billion.
The transaction, expected to close in the third quarter of 2023, has been unanimously approved by the board of directors of both companies. 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.
The deal, however, has hit a snag as Energy Income Partners (EIP), one of Magellan Midstream’s top shareholders, said last week that it intends to vote against the proposed transaction because it “believes that taxes paid by investors will exceed the premium offered by ONEOK and any other potential benefits from the merger.”
EIP wants Magellan to remain a stand-alone entity whose returns on invested capital are far superior to ONEOK, the company, which is the fourth largest shareholder in Magellan, said in a letter to Magellan’s Board last week.
The second-largest deal in oil and gas in May was Chevron’s agreement to buy shale firm PDC Energy in an all-stock transaction valued at $6.3 billion, or $72 per share. The total enterprise value of the deal, including debt, is $7.6 billion, and this transaction could mark an acceleration of deal-making in the U.S. shale patch.
The market has been expecting a deal from the supermajors since reports emerged in April of talks about ExxonMobil potentially buying Pioneer Natural Resources.