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Magellan (MMP) & ONEOK Clear Hurdle in Pending Acquisition
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Magellan Midstream Partners, L.P. announced expiry of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) of 1976 in connection with ONEOK, Inc.'s (OKE - Free Report) pending acquisition of Magellan. This milestone marks a step forward in ONEOK's $18.8 billion acquisition of Magellan and brings the transaction closer to completion.
The HSR Act is designed to allow the Federal Trade Commission and the Department of Justice to review and evaluate the potential antitrust implications of certain mergers and acquisitions before they are finalized.
The exhaustion of the waiting period satisfies one of the conditions necessary for the successful completion of the aforementioned acquisition. The transaction is expected to close in the third quarter of this year, subject to approval by ONEOK’s shareholders and Magellan’s unitholders, along with other customary conditions.
Once completed, this buyout will create one of the largest energy pipeline operators, combining the expertise and assets of both companies. Although the deal initially appeared to be a sure thing, factors like current share prices and the arbitrage spread have led to speculations about a 50-50 chance of its completion.
ONEOK is a midstream service provider with a top natural gas liquids system in the United States. It connects supplies in Rocky Mountain, Permian and Mid-Continent regions with key market centers. The company’s extensive network includes gathering, processing, fractionation, transportation and storage assets, making it a key player in the industry.
Magellan is a Tulsa-based master limited partnership that operates a diversified portfolio of energy infrastructure assets, primarily transporting, storing, and distributing refined petroleum products and ammonia. With the longest refined petroleum pipeline system in the United States, MMP has access to nearly half of the domestic refining capacity. The company operates under two segments — Refined Products and Crude Oil.
The acquisition brings together two premier energy infrastructure businesses, offering strong returns on invested capital and diverse free cash flow generation. The companies expect to achieve immediate financial benefits, including cost, operational and tax synergies, resulting in meaningful accretion.
The combination of complementary and diversified asset positions provides the potential for additional cost and commercial synergies over time. Moreover, the enhanced scale and diversification will contribute to strong investment-grade credit ratings for the combined company.
The completion of the buyout will consolidate the strengths and capabilities of both MMP and OKE, enabling them to better serve the energy industry and meet the evolving demands of the market. It also signifies a significant development in the energy sector and paves the way for enhanced operations and growth opportunities.
Zacks Rank and Price Performance
MMP currently carries a Zacks #3 (Hold). Shares of MMP have rallied 40.4% in the past year compared with the industry’s growth of 26.1%.
Evolution Petroleum is worth approximately $280.79 million. EPM currently pays a dividend of 48 cents per share, or 5.69% on an annual basis.
The company currently has a forward P/E ratio of 7.64. In comparison, its industry has an average forward P/E of 19.90, which means EPM is trading at a discount to the group.
Archrock is valued at around $1.58 billion. It delivered an average earnings surprise of 8.34% for the last four quarters and its current dividend yield is 5.96%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
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Magellan (MMP) & ONEOK Clear Hurdle in Pending Acquisition
Magellan Midstream Partners, L.P. announced expiry of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) of 1976 in connection with ONEOK, Inc.'s (OKE - Free Report) pending acquisition of Magellan. This milestone marks a step forward in ONEOK's $18.8 billion acquisition of Magellan and brings the transaction closer to completion.
The HSR Act is designed to allow the Federal Trade Commission and the Department of Justice to review and evaluate the potential antitrust implications of certain mergers and acquisitions before they are finalized.
The exhaustion of the waiting period satisfies one of the conditions necessary for the successful completion of the aforementioned acquisition. The transaction is expected to close in the third quarter of this year, subject to approval by ONEOK’s shareholders and Magellan’s unitholders, along with other customary conditions.
Once completed, this buyout will create one of the largest energy pipeline operators, combining the expertise and assets of both companies. Although the deal initially appeared to be a sure thing, factors like current share prices and the arbitrage spread have led to speculations about a 50-50 chance of its completion.
ONEOK is a midstream service provider with a top natural gas liquids system in the United States. It connects supplies in Rocky Mountain, Permian and Mid-Continent regions with key market centers. The company’s extensive network includes gathering, processing, fractionation, transportation and storage assets, making it a key player in the industry.
Magellan is a Tulsa-based master limited partnership that operates a diversified portfolio of energy infrastructure assets, primarily transporting, storing, and distributing refined petroleum products and ammonia. With the longest refined petroleum pipeline system in the United States, MMP has access to nearly half of the domestic refining capacity. The company operates under two segments — Refined Products and Crude Oil.
The acquisition brings together two premier energy infrastructure businesses, offering strong returns on invested capital and diverse free cash flow generation. The companies expect to achieve immediate financial benefits, including cost, operational and tax synergies, resulting in meaningful accretion.
The combination of complementary and diversified asset positions provides the potential for additional cost and commercial synergies over time. Moreover, the enhanced scale and diversification will contribute to strong investment-grade credit ratings for the combined company.
The completion of the buyout will consolidate the strengths and capabilities of both MMP and OKE, enabling them to better serve the energy industry and meet the evolving demands of the market. It also signifies a significant development in the energy sector and paves the way for enhanced operations and growth opportunities.
Zacks Rank and Price Performance
MMP currently carries a Zacks #3 (Hold). Shares of MMP have rallied 40.4% in the past year compared with the industry’s growth of 26.1%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks for investors interested in the energy sector are Evolution Petroleum (EPM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Archrock (AROC - Free Report) , carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Evolution Petroleum is worth approximately $280.79 million. EPM currently pays a dividend of 48 cents per share, or 5.69% on an annual basis.
The company currently has a forward P/E ratio of 7.64. In comparison, its industry has an average forward P/E of 19.90, which means EPM is trading at a discount to the group.
Archrock is valued at around $1.58 billion. It delivered an average earnings surprise of 8.34% for the last four quarters and its current dividend yield is 5.96%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.