2023-05-18 07:15:00 ET
Summary
- ONEOK, Inc. is buying Magellan Midstream Partners, L.P. for $18.8 billion in one of the best deals I've ever seen for midstream investors on both sides.
- ONEOK offered to buy Magellan at fair value and could close the deal at an 8% discount.
- Including expected synergistic cost and tax savings, ONEOK could be getting Magellan at a 46% discount, or 7.3X EV/EBITDA.
- The payout ratio falls to 56%, making for a much safer dividend, and the cash flow is now more diversified as well - rating agencies, analysts, and the bond market all like this deal.
- The tax implications for Magellan investors are the same whether you sell now or wait to get your ONEOK shares. ONEOK is a faster-growing company with superior risk management and similar quality and yield to Magellan. The reward-to-risk ratio is 8.2X more favorable if you sell Magellan now and buy ONEOK rather than waiting until the deal closes.
For further details see:
ONEOK Buying Magellan Creates 6.7% Yielding Life-Changing Opportunity