MarkWest Energy Partners LP (NYSE:MWE) is on its way to being bought by the pipeline unit of refiner Marathon Petroleum Corp. The second-largest U.S. processor of natural gas will cost a whopping $15.8 billion in stock and cash, a transaction that has been termed as a precise representation of expansion into pipelines and processing for Marathon.
The deal is a one-time cash payment to MarkWest unit-holders, tax-free and also a “unit-for-unit”. From the combination of the two entities, a $21 billion company will be created. This will become the nation’s fourth-largest master limited partnership. The combination will also help in building the Company’s shipping and processing capabilities.
A New York-based analyst at Oppenheimer & Co., Fadel Gheit, has commended the combination while acknowledging it is for the benefit of the two since it will give them economies of scale. However, the biggest share of the gain will go to Marathon Petroleum. This come along with flexibility in the way feedstock for their refining system is sourced.
Through the ownership of the MPLX general partner, Marathon will retain control of the combined entity while getting to own 19 percent of the partnership.
The latest unfolding clearly defines the interest in mergers that has continued to grow strong for owners of pipelines and processing units.
1.09 MPLX standard units and a one-time cash payment of $3.37 a MarkWest unit are what common unit holders will get under the MarkWest merger agreement. This is equivalent to $78.64 a unit. To fund the cash payment, Marathon Petroleum Corp will contribute $675 million.
According to Gary Heminger, Marathon Chairman, and Chief Executive Officer, the combination will bring along a new kind of competition whose success will be a sustainable growth.
Subject to the approval of MarkWest Energy Partners LP (NYSE:MWE) unit holders and regulatory agencies, the deal is being anticipated to close in the 2015 fourth quarter.
UBS Investment Bank AG and Jones Day acted as financial and legal adviser to MPLX respectively while Jefferies Group LLC and Cravath, Swaine & Moore was acting as the legal counsel to MarkWest.
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