Oneok Inc. said it plans to acquire all of the outstanding common units of its master limited partnership (MLP), Oneok Partners LP, in an all-stock deal valued at $9.3 billion.
In a statement Wednesday, Tulsa, OK-based Oneok said the agreement calls for each outstanding common unit of the MLP that it does not already own -- 171.5 million units in total -- to be converted into 0.985 shares of Oneok common stock. That would represent a 22.4% premium to the MLP's closing price from last Friday. Oneok will issue 168.9 million shares as part of the transaction.
"This acquisition of the balance of Oneok Partners underscores the strategic value we place on the business we have successfully built since we ventured into the midstream space nearly 20 years ago," said Terry Spencer, CEO of both entities. "A broad asset footprint, stable cash flows and attractive growth prospects remain core to our long-term growth strategy.
"Through the acquisition of the 60% of the limited partner interests in Oneok Partners that Oneok does not already own, Oneok becomes a standalone operating company with a lower cost of funding and stronger cash flow generation."
The transaction is expected to close in 2Q2017. Oneok said that as a result of the deal its annual distributable cash flow is expected to nearly double. As a consequence, Oneok said its management intends to recommend to the company's board of directors a 21% dividend increase in 1Q2017 after the deal closes, and expects an annual dividend growth rate of 9-11% through 2021.
"Shareholders of Oneok are expected to benefit from an increased dividend and higher dividend growth rate," Spencer said. "We also anticipate the transaction will provide Oneok enhanced access to the broader capital markets to support and fund future growth to meet the needs of our customers."
Upon closing of the transaction, Oneok is expected to have more than $30 billion of enterprise value and a 37,000-mile network of pipelines to transport natural gas and natural gas liquids (NGL). The combined company will also have processing plants, fractionators and storage facilities in the Permian and Williston basins, and the Midcontinent, Midwest and Gulf Coast regions.
Oneok sold its natural gas pipelines, gathering, processing, storage and NGL assets to Northern Border Partners LP for $3 billion in April 2006. The MLP changed its name to Oneok Partners LP the next month.