TEPPCO Partners LP has turned down a $2.8 billion takeover proposal from Enterprise Products Partners LP but “remains willing to consider a revised proposal that appropriately recognizes the value of TEPPCO,” the company said Wednesday.

Enterprise had offered to acquire all of TEPPCO’s outstanding partnership interests for 1.043 Enterprise common units plus $1.00 in cash for each TEPPCO common unit. Based on the current number of outstanding TEPPCO units, the offer would have consisted of an aggregate of approximately 109.5 million Enterprise common units and $105 million in cash, according to Enterprise. The deal would have represented $21.89/share, or a premium of approximately 4.8% based on the 10-day average closing prices of TEPPCO units and Enterprise common units on March 6, the business day prior to the date on which Enterprise made its proposal to TEPPCO.

Enterprise shares closed at $24.24 on Wednesday, down 53 cents from Tuesday’s close. TEPPCO shares closed at $27.74 Wednesday, up $1.64 from Tuesday’s close.

While Enterprise said it does not currently own any TEPPCO units, the two companies are hardly strangers. Two years ago Enterprise GP Holdings LP gained a minority stake in Energy Transfer Equity LP and TEPPCO Partners LP through a pair of transactions, which together were worth an estimated $2.8 billion, becoming the first publicly traded partnership to own direct or indirect interests in the general partners of multiple publicly traded partnerships (see Daily GPI, May 9, 2007). Both of the partnerships are controlled by Texas oilman Dan Duncan.

The Enterprise proposal did not specify consideration to be paid for TEPPCO’s general partner interests, including incentive distribution rights, which are owned by Texas Eastern Products Pipeline Co. (TEPPCO GP). TEPPCO GP is owned by Enterprise GP Holdings, which owns approximately 4.2% of the outstanding units of TEPPCO, the general partner of Enterprise, and approximately 3% of the outstanding common units of Enterprise.

The credit crunch and unrest in capital markets prompted Enterprise to scrap plans to take a stake in TransCanada Corp.’s proposed Pathfinder Pipeline late last year (see Daily GPI, Dec. 31, 2008). At the time the company said Enterprise was poised for acquisitions, should the right deal come around.

TEPPCO owns and operates an extensive network of assets including a midstream network comprised of approximately 12,500 miles of pipelines that gather and transport refined petroleum products, crude oil, natural gas, liquefied petroleum gases (LPG) and natural gas liquids, It also includes one of the largest common carrier pipelines for refined petroleum products and LPGs in the United States, as well as storage assets for refined petroleum products, crude oil and LPGs and about 14 million bbl of capacity for crude oil. TEPPCO also owns a marine business and interests in Seaway Crude Pipeline Co., Centennial Pipeline LLC, Jonah Gas Gathering Co., along with an undivided ownership interest in the Basin Pipeline.

Enterprise transports natural gas, natural gas liquids (NGL), crude oil and petrochemicals through more than 36,000 miles of onshore and offshore pipelines, and provides services including natural gas transportation, gathering, processing and storage; NGL fractionation, transportation, storage, and import and export terminaling; crude oil transportation; offshore production platform services; and petrochemical transportation and services.

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