(Bloomberg) – US gas pipeline giant Energy Transfer LP has agreed to buy rival operator SemGroup Corp. for about $ 1.35 billion in stock and cash deals, building billionaire Kelsey Warren's empire, even when investors require financial discipline.
Energy Transfer shares fell to 4.4% on a day when peers rose after an attack on a Saudi Arabian processing facility, oil prices rose sharply. Despite comments last year that Warren was hunting for deals, some analysts said the move came as a surprise given the company's low stock price and efforts to reduce debt.
"This morning's acquisition represents a sharp turn away from recent reports on portfolio management, capital discipline and accelerated asset separation," analysts at Tudor Pickering Holt & Co. say in a note to customers.
Making deals has been a touching topic for Warren since the energy transfer moved away from the $ 33 billion agreement to buy Williams Kos., Which would be his biggest acquisition to date.
Warren – who built his empire by scraping small pipelines in the wake of the shale boom – first signaled that he could soon return when purchasing August last year. It was only eight days after the company announced streamlining in part to improve stock performance.
"We kiss a lot of frogs looking for a prince," Warren said during a conference in November. "We work hard. However, I will tell you that we do not find any deals. "
The crude and SemGroup product terminal on the Houston Ship Channel is probably the engine behind Energy Transfer's decision to buy the company," said Michael Bloom at Wells Fargo Securities. note monday. However, "many of the other assets do not seem to fit ET's footprint and are of lower quality and we would not be surprised to see ET separate some of the assets," he says.
"From 30,000 feet," in a market where investors are pushing companies to cut costs and leverage and increase free cash flow, we're not sure the optics of this deal will be met with enthusiasm, Blum wrote.
Transfer Transfer "We will probably run into investors' control over the combination of assets and merits of the transaction, even though at first glance it passes our litmus test for growth," Citigroup Inc. analyst writes. Tim Schneider in a note to clients.
"We would like to ask some questions, but there is no conference," Schneider said.
Pipeline developers have been struggling to raise capital markets after the collapse of oil prices, which began in 2014. The industry was also overwhelmed by a change in US tax policy that affected crude and natural gas companies structured. as major limited liability companies.
The total value of the acquisition, including debt, is approximately $ 5 billion, according to the statement. Jefferies LLC acts as the sole financial advisor to SemGroup, while Bank of America Merrill Lynch advises energy transfers.
While energy transfer offers a large takeover premium, Toulouse-based SemGroup has seen its shares fall more than half over the past year. Previously, the company worked as an advisor on alternative options for raising capital. According to people familiar with the matter earlier this year.
SemGroup rose 65% on Monday morning. "This is a nice exit ramp for the company after a strategic review that could go in many directions," Wells Fargo's Blum says.
The agreement comes as the energy transfer wants to sell a 33% stake in its Rover pipeline, which carries
(Updates with comment by analyst in tenth paragraph)
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