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Oneok’s (NYSE:OKE) $18.8B takeover provide for Magellan Midstream Companions (NYSE:MMP) that will create one of many largest vitality pipeline operators initially seemed like a certain factor, however might have only a 50-50 probability of getting accomplished based mostly on present share costs and the arbitrage unfold, Andrew Bary wrote Monday in Barron’s.
One of many largest dangers to the deal is that fifty%-60% of Magellan (MMP) unitholders are particular person traders, Bary believes, noting that retail traders usually don’t vote in massive numbers in proxy and different votes, which might imperil the transaction because it requires the affirmative vote of half of Magellan’s ~202M models excellent; a non-vote is handled like a “no” vote.
Bary additionally famous intense criticism from particular person traders due to an enormous tax invoice for longtime unitholders; institutional investor Vitality Revenue Companions just lately got here out in opposition to the deal partly because of the tax difficulty, arguing the tax paid by many traders will exceed the premium supplied by Oneok (OKE) and different potential advantages of the merger.
Bary additionally speculated that Berkshire Hathaway (BRK.A) (BRK.B), which owns a number of pure fuel pipelines and is lively within the utility house, might take an curiosity in buying Magellan (MMP).
“Berkshire might provide, say, $70/share in money for Magellan, above the $67.50 preliminary worth of the Oneok deal per Magellan partnership unit, and the present deal worth of about $64/unit based mostly on Oneok’s share worth,” Bary wrote.
Berkshire’s (BRK.A) (BRK.B) Warren Buffett “doesn’t wish to take part in company auctions however he might presumably make a take-it or leave-up provide to Magellan,” Bary speculated.
Extra on proposed Oneok-Magellan merger:
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