Tallgrass Energy, LP (TGE - Free Report) recently announced that Blackstone Infrastructure Partners (BX - Free Report) and its affiliates proposed/offered to buy its publicly held outstanding units that they currently don’t own.
The deal offers a price of $19.50 per unit in cash, signifying a 36% premium to the partnership’s closing price on Aug 27, 2019. The volume weighted average price also represents a premium of 12% in the trailing 30 days.
Blackstone already holds 44.2% stake in Tallgrass Energy since January-end this year with 23.7 million Class A units. Thereon, Tallgrass Energy units have plunged almost 40%. The factors responsible for the slump in unit price include crash in the overall energy sector plus Tallgrass Energy’s underperformance in the second quarter.
Earnings of this oil and natural gas pipeline operator missed the Zacks Consensus Estimate on both the top and the bottom line in the second quarter. Further, investors were concerned about the conflicts of interest arising from Blackstone’s initial transaction, which vests it with a general partner’s power and an effective control of a limited partner despite holding a minority interest.
With the Tallgrass Energy stock plummeting to almost half the price that Blackstone paid, the latter, which is a private equity group, has planned to own the rest of the units worth $3.03 billion, depending on the number of Class A units valued at 179.2 million at July-end.
The Kansas-based midstream energy company wants to form an independent committee comprising independent financial and legal advisors for assessing this bid.
Several energy sector players had earlier privatized the struggling energy companies they are in charge of. In May, 2019, Brookfield Business Partners LP offered to acquire the residual units of Teekay Offshore Partners LP, which they did not own earlier.
Zacks Rank & Key Picks
Tallgrass Energy carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Enbridge Inc. (ENB - Free Report) and Dril-Quip, Inc. (DRQ - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Enbridge earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Dril-Quip earnings beat the Zacks Consensus Estimate in three of the previous four quarters.
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