Teppco Agreed to Revised $3.3 B Offer

123jump.com Staff
29 Jun, 2009
New York City

Teppco agreed to be acquired by Enterprise Products Partners to create one of the largest energy in the mid-stream segment of the market. The revised offer values each unit of Teppco at $31.36. The deal creates one of the largest and healthy partnerships to transport crude oil and natural gas.

[R]10:55 AM New York – Teppco agreed to be acquired by Enterprise Products Partners to create one of the largest energy in the mid-stream segment of the market.[/R]

Enterprise Products Partners LP agreed to acquire Teppco Partners for $3.3 billion. The deal combines the natural processing and transportation assets of Enterprise with the crude oil refining and logistics assets of Teppco. The deal is expected to be accretive in 2010 on cost savings and elimination of processing and logistic costs and cheaper cost of capital.

Teppco rejected the earlier offer that valued the company at $2.8 billion in March.

Teppco Partners, L.P. ((TPP)) increased 4.4% to $29.95 after Enterprise Products Partners L.P. ((EPD)) agreed to acquire the pipeline operator.

The combined partnership will own 48,000 miles of pipelines of which 22,000 miles will transport NGL, 20,000 miles of natural gas pipelines and more than 5,000 miles of crude oil pipelines.

Chief executive of Enterprise, Michael A. Creel said that the merger will be accretive by 2010 and the company hopes to achieve at least $20 million of cost savings.

Teppco unit holders excluding Epco Inc will receive 1.24 units of Enterprise for each unit held. The exchange represents 14.5% premium to the initial offer made in March and 18.8% premium to the last ten days of average closing price.

Teppco shares had dropped as low as $18 in the last week in December and since then rebounded to nearly $31 on June 2.

Under the merger Teppco and its general partner will become wholly owned subsidiaries of Enterprise.

Epco Inc affiliate, controlled by Dan L. Duncan will receive will exchange its 11.5 million Teppco units for 14.24 million Enterprise units, based on the 1.24 exchange rate, which will consist of 9.7 million Enterprise common units and 4.5 million Enterprise Class B units. The Enterprise Class B units will not be entitled to quarterly cash distributions for the sixteen quarters following the closing of the merger.

Enterprise GP will get 1.33 million of Enterprise unit and keep its 2% control of the company.

After the merger the affiliated of Epco Inc will control 29.5% of Enterprise limited partner unit and Enterprise GP will control 3.4%.

The Teppco’s strength is in crude oil refining and transportation and Enterprise is strong in natural gas distribution and processing plants.

Barclays Capital Inc acted as financial advisor to Enterprise and Lazard Freres & Co advised on the audits, conflicts and corporate governance. Credit Suisse advised for the independent special committee of the audit to the general partners of Teppco.

The merged partnership’s logistical assets will include approximately 200 million barrels of natural gas and oil storage, 27 billion cubic feet of natural gas storage capacity and one of the largest processing terminals located on the Houston Ship Channel.

The combined partnership will own interests in 17 fractionation plants with over 600,000 barrels of daily capacity; 25 natural gas processing plants with approximately 9 billion cubic feet per day capacity; and 3 butane isomerization facilities with daily capacity of 116,000 barrels.

The combined partnership would also be one of the largest inland tank barge companies in the U.S.