ONEOK to acquire Magellan Midstream Partners in $18.8-billion deal

ONEOK Inc. has agreed to acquire Magellan Midstream Partners LP in a cash-and-stock transaction valued at about $18.8 billion including $5 billion in assumed net debt.

Through the deal, Magellan would be merged into a newly created, 100% wholly owned subsidiary of ONEOK, adding a primarily fee-based refined products and crude oil transportation business to ONEOK, the companies said in a joint statement May 14.

Magellan has a 9,800-mile refined products pipeline system with 54 connected terminals and two marine storage terminals (one through a joint venture), according to the company’s website. The company also owns some 2,200 miles of crude oil pipelines, a condensate splitter, and storage infrastructure with an aggregate storage capacity of about 39 million bbl, of which 29 million are used for contract storage. About 1,000 miles of these pipelines, the condensate splitter, and 31 million bbl of the storage capacity (including 25 million bbl used for contract storage) are wholly owned, with the remainder owned through joint ventures.

The combined company will own more than 25,000 miles of liquids-oriented pipelines, with significant assets and operational expertise at the Gulf Coast and Mid-Continent market hubs, ONEOK said. Base forecasted synergies are expected to total at least $200 million annually.

"Our expanded products platform will present further opportunities in our core businesses as well as enhance our ability to participate in the ongoing energy transformation with an increased presence in sustainable fuel and hydrogen corridors,” said Pierce H. Norton II, ONEOK president and chief executive officer. 

Each Magellan unitholder will receive $25.00 in cash and 0.6670 shares of ONEOK stock per unit, a 22% premium to the Magellan closing price on May 12. 

The transaction is expected to close in this year’s third quarter, subject to customary closing conditions, after which Norton will continue to serve as chief executive officer. ONEOK has secured $5.25 billion in fully committed bridge financing for the proposed cash consideration.