SemGroup (NYSE: SEMG) is expected to merge with Energy Transfer (NYSE: ET), one of the largest, diversified midstream energy companies in North America. This is following a recent confirmed acquisition agreement worth $5.1 billion which will be in cash and unit transaction. The $5.1 billion will assume both debts and other liabilities as stipulated by the agreement between the two companies which has been approved by their Board of Directors.
As a result of this merging, SemGroup shareholders are set to receive $6.80 in cash and 0.7275 of an Energy Transfer common unit for each of their share. Alternatively, they are to receive 40% cash and 60% equity of every of Energy Transfer share. However, this SemGroup equity portion is exempted from tax, hence being treated as a tax-free transaction.
More so, SemGroup shareholders are anticipated to own approximately 2.2% of Energy Transfer Outstanding Common Units before and when closing either by late 2019 or early 2020.
The merger deal is anticipated to benefit SemGroup where it could help the company join one of the largest midstream energy companies in the United States which has a strong footprint in all the primary United States production basins.
On top of that, the deal could help SemGroup achieve a combined scale, entity’s size and financial profile in the United States energy sector. This could ensure that SemGroup assets such as mid-continent footprint, Gulf Coast Terminal and Canadian joint venture SemCAMS Midstream benefit from the companies great growth in the future.
That’s not all, the acquisition deal is anticipated to expand terminalling infrastructure and increase pipeline connectivity. Also, the merge could increase SemGroup shareholder value through providing immediate value, an opportunity to participate in future partnership and significant premium.
As a matter of fact and when winding up, the merge could help SemGroup provide effiecient, safe and reliable services and at the same time create a highly desired asset portfolio.
Featured image via Energy Transfer Youtube