(Source: Business Wire)
Enterprise Products Partners L.P. (NYSE:EPD) (referred to as "Enterprise"), TEPPCO Partners, L.P. (NYSE:TPP) (referred to as "TEPPCO") and Enterprise GP Holdings L.P. (NYSE:EPE) (referred to as "Enterprise GP") today announced that Enterprise and TEPPCO have entered into definitive agreements to merge Enterprise and TEPPCO (along with TEPPCO's general partner) to form the largest publicly traded energy partnership with an enterprise value of more than $26 billion. The combined partnership, which will retain the name Enterprise Products Partners L.P., will access the largest producing basins of natural gas, natural gas liquids (NGLs) and crude oil in the U.S., and serve some of the largest consuming regions for natural gas, NGLs, refined products, crude oil and petrochemicals.
The combined partnership will own almost 48,000 miles of pipelines comprised of over 22,000 miles of NGL, refined product and petrochemical pipelines, over 20,000 miles of natural gas pipelines and more than 5,000 miles of crude oil pipelines. The merged partnership's logistical assets will include approximately 200 million barrels of NGL, refined product and crude oil storage capacity; 27 billion cubic feet of natural gas storage capacity; one of the largest NGL import/export terminals in the U.S., located on the Houston Ship Channel; 60 NGL, refined product and chemical terminals spanning the U.S. from the west coast to the east coast; and crude oil import terminals on the Texas Gulf Coast. The combined partnership will own interests in 17 fractionation plants with over 600,000 barrels per day of net capacity; 25 natural gas processing plants with a net capacity of approximately 9 billion cubic feet per day; and 3 butane isomerization facilities with a capacity of 116,000 barrels per day. The combined partnership would also be one of the largest inland tank barge companies in the U.S.
"We are excited to announce this merger, which will establish Enterprise as the largest pipeline partnership as measured by miles of pipe, enterprise value and equity market capitalization," said Michael A. Creel, President and Chief Executive Officer of Enterprise. "We believe this combination will provide long-term accretion for Enterprise's unitholders and general partner, driven by our scale, broad geographic and business diversification and the benefits of our integrated midstream energy system. This transaction expands Enterprise's lines of business beyond its strong operating presence in providing services to producers and consumers of natural gas and NGLs into the transportation and storage of refined products and crude oil. We expect the merger to be accretive in 2010 as we begin to generate cash flow from incremental commercial and organic growth opportunities, in addition to at least $20 million of cost savings and overall system optimization. We also believe the size, financial stability and liquidity of the combined company will appeal to our customers and our debt and equity investors."
Jerry E. Thompson, President and Chief Executive Officer of TEPPCO, said, "With our foundation of fee-based businesses, TEPPCO complements Enterprise's strategic philosophy and provides an added dimension of asset diversification. The strength of the combined partnership should benefit TEPPCO investors through a lower cost of capital and improved access to the capital markets, both of which should enhance our ability to participate in accretive projects and support our ability to increase distributions to partners in the future. Additionally, TEPPCO customers can expect to continue receiving the same outstanding service to which they have become accustomed."
Under the terms of the definitive agreement, TEPPCO and TEPPCO's general partner, Texas Eastern Products Pipeline Company, LLC (referred to as "TEPPCO GP"), will become wholly-owned subsidiaries of Enterprise. In consideration, TEPPCO unitholders, except for a certain affiliate of EPCO, Inc., will receive 1.24 Enterprise common units for each TEPPCO unit, representing: a 14.5 percent premium to the initial offer made by Enterprise on March 9, 2009; an 18.8 percent premium to the exchange rate based on the last 10-day average closing prices of TEPPCO units and Enterprise common units on March 6, 2009, the business day prior to the date on which Enterprise made its initial offer; and a 9.3 percent premium to the closing price of TEPPCO units on June 26, 2009.
An affiliate of EPCO, Inc., a private company controlled by Dan L. Duncan, will exchange its 11,486,711 TEPPCO units for 14,243,521 Enterprise units, based on the 1.24 exchange rate, which will consist of 9,723,090 Enterprise common units and 4,520,431 Enterprise Class B units. The Enterprise Class B units will not be entitled to regular quarterly cash distributions for the sixteen quarters following the closing of the merger. The Class B units will convert automatically into the same number of common units on the date immediately following the payment date of the sixteenth distribution following the closing of the merger. The total distributions forgone by the Class B units would be more than $40 million based on expected increases in the cash distribution rate for Enterprise's common units during this period. The Class B units will be entitled to vote together with the common units as a single class on partnership matters.
