OKE - Magellan Midstream Files Investor Presentation Highlighting Benefits of Pending ONEOK Transaction | Benzinga

Transaction delivers full value to Magellan unitholders and provides unitholders with ownership in a stronger combined company

Combined company better positioned to address secular risks and achieve strong growth and value creation over the long term

Board carefully considered alternative opportunities, structures and tax implications

Magellan urges unitholders to vote "FOR" the pending merger today

TULSA, Okla., Aug. 29, 2023 /PRNewswire/ -- Magellan Midstream Partners, L.P. (NYSE:MMP) ("Magellan") today announced the filing of an investor presentation with the U.S. Securities and Exchange Commission in connection with our pending merger with ONEOK, Inc. (NYSE:OKE) ("ONEOK"). The investor presentation is also available at MaximizingValueforMMPunitholders.com.

"We are confident the pending merger with ONEOK is the best path forward for Magellan and is in the best interests of Magellan unitholders," said Aaron Milford, chief executive officer. "The merger provides significant premium value to Magellan unitholders, with a meaningful upfront cash consideration as well as substantial ownership in a stronger combined company that has greater growth opportunities, scale, diversification and resilience. We urge all Magellan unitholders to vote 'FOR' the pending merger today to receive full value for their units."

Highlights of the presentation include:

Magellan believes the transaction delivers full value to Magellan unitholders 

• Transaction multiple and premium exceed precedent industry transactions, representing the highest enterprise value to adjusted EBITDA ("EV / EBITDA") multiple of comparable midstream energy transactions since 2016, an EV / EBITDA multiple that is 2.5x higher than Magellan's publicly traded peers¹, and, at 22%, the highest premium of comparable midstream transactions since the pandemic induced a sector re-rating
• Implied value of merger consideration exceeds Magellan's trading value at any point in approximately 5 years
• Board negotiated 4 price increases, fiduciary out, lower termination fee, ability to pay pre-closing special distributions and significant cash component – and carefully evaluated ONEOK assets, strategy and track record before determining transaction maximized value
• As shown below, the proposed transaction premium adds to Magellan's already premium EV / EBITDA trading multiple. If the transaction fails to close, Magellan's unit price could decline to a multiple in line with our peers, which would result in a 28% decline to the implied transaction value

Exhibit 1: Transaction premium adds to an already premium trading multiple¹
Exhibit 2: Potential risk of multiple re-rating if transaction does not close¹

Magellan could face long-term secular risks as a standalone company; Magellan believes that the valuation offered in the merger captures fair value for unitholders and that the transaction mitigates these risks, creating a diversified, scaled and resilient combined company that is well-positioned for the long term 

• Many respected third parties forecast demand for U.S. refined products to decline more than 40% from 2022 to 2050; if correct, these forecasts represent lower demand than we currently expect and than is represented in the value received in the merger
• Crude oil production to remain below existing pipeline capacity, placing downward pressure on utilization and re-contracted rates
• There are more limited attractive growth opportunities in crude oil and refined products segments
• Significant sector consolidation leaves fewer viable M&A and other strategic opportunities
• Implementing inorganic growth opportunities would likely result in paying (rather than receiving) transaction premiums and issuing equity that we believe has been consistently undervalued absent this merger
• With enhanced scale and diversification, the combined company will have greater growth opportunities and be better positioned across industry cycles
• Combined company to have resilient product mix, mirroring that of larger-scale peers
• Potential uplift of approximately $6.1 billion (approximately $7 per Magellan unit pro-rata⁶) from capitalized risked synergies and significant tax deferral
• Global demand for natural gas and NGL-related products is expected to increase more than 20% through 2040⁷
• Adds more than $1.5 billion of diversified annual EBITDA, more than 85% of which is fee-based, reducing commodity exposure and cash flow volatility
• Increases EBITDA CAGR by approximately 170% through 2025, with pro forma growth expected to outpace midstream peers⁸
• 4.0x step-up in free cash flow after distributions to approximately $1 billion average annually (2024 to 2027), enabling increased spending on value-creating organic growth projects
• Strong pro forma balance sheet creates financial flexibility to increase capital deployment at attractive returns, while also returning capital to shareholders through substantial dividends and share repurchases
• Increased scale provides more trading liquidity, a broader investor base and inclusion in the S&P 500 index

Exhibit 3: Combined company has stronger growth outlook than standalone MMP
Exhibit 4: MMP unitholders will gain exposure to a resilient asset profile, with higher growth than standalone MMP
Exhibit 5: Risk-weighted synergy opportunities

Magellan board carefully reviewed alternative opportunities, structures and ...

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