2023-06-26 18:55:40 ET
Oneok's ( NYSE: OKE ) $18.8B takeover offer for Magellan Midstream Partners ( NYSE: MMP ) that would create one of the largest energy pipeline operators initially looked like a sure thing, but may have just a 50-50 chance of getting completed based on current share prices and the arbitrage spread, Andrew Bary wrote Monday in Barron's .
One of the biggest risks to the deal is that 50%-60% of Magellan ( MMP ) unitholders are individual investors, Bary believes, noting that retail investors often do not vote in big numbers in proxy and other votes, which could imperil the transaction since it requires the affirmative vote of half of Magellan's ~202M units outstanding; a non-vote is treated like a "no" vote.
Bary also noted intense criticism from individual investors because of a big tax bill for longtime unitholders; institutional investor Energy Income Partners recently came out against the deal in part due to the tax issue, arguing the tax paid by many investors will exceed the premium offered by Oneok ( OKE ) and other potential benefits of the merger.
Bary also speculated that Berkshire Hathaway ( BRK.A ) ( BRK.B ), which owns several natural gas pipelines and is active in the utility space, could take an interest in acquiring Magellan ( MMP ).
"Berkshire could offer, say, $70/share in cash for Magellan, above the $67.50 initial value of the Oneok deal per Magellan partnership unit, and the current deal value of about $64/unit based on Oneok's share price," Bary wrote.
Berkshire's ( BRK.A ) ( BRK.B ) Warren Buffett "does not like to participate in corporate auctions but he could possibly make a take-it or leave-up offer to Magellan," Bary wrote.
More on proposed Oneok-Magellan merger:
- Oneok Is A Buy With Or Without Magellan Midstream
- Oneok And Magellan May Be Stronger Together But Face Opposition From Unitholders
- Magellan Midstream: Long-Term Investors Should Reject The Oneok Deal
For further details see:
Barron's asks whether Berkshire could step in if Oneok-Magellan deal derails