Jun. 29--Enterprise Products will acquire Teppco Partners in a $3.3 billion deal that forms a massive new player in the oil and gas pipeline and storage business, the companies said today.

Both companies are associated with the business empire of Houston billionaire Dan Duncan.

The move, which comes after Teppco rebuffed a lower offer earlier this year, creates a company with nearly 48,000 miles of pipelines, 60 terminals for storing natural gas liquids, refined products and chemicals, one of the largest natural gas liquids import and export terminals in the U.S. at the Houston Ship Channel and other assets.

The combined company, which will keep the name Enterprise Products Partners LP, will have a presence in some of the nation's largest natural gas basins and crude oil fields, tie in to nearly every oil refinery and chemical plant in the nation and deliver natural gas, refined products, crude oil and petrochemicals to consuming markets throughout the country.

"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 CEO of Enterprise, in a statement.

Jerry E. Thompson, Teppco's president and CEO, said in a conference call this morning the "combined entity provides an opportunity for Teppco to grow its assets faster than we could have on a stand-alone basis."

Company officials expect the merger to begin boosting earnings of the combined company by 2010 and deliver cost savings of $20 million.

Under the agreement, Teppco and Teppco general partner, Texas Eastern Products Pipeline Company, LLC will become wholly owned subsidiaries of Enterprise.

The merger has the support of the companies' respective boards of directors but still must receive federal anti-trust clearance and approval from company investors. Company officials expect the transaction to close in the fourth quarter.

Dan Duncan's Enterprise GP Holdings LP owns the general partners that control Enterprise and Teppco. Both pipeline operators are master limited partnerships, known as MLPs, which are exempt from federal income taxes and rely on assets that steadily generate cash flow that can be used to make payouts to unit holders--roughly equivalent to shareholders in a corporation.

As part of the acquisition, an affiliate of another Duncan company, Epco Inc., will convert its 11.5 million Teppco units to 9.72 million common units and 4.52 million Class B units of Enterprise. Epco's Class B units won't receive quarterly payouts for four years, foregoing more than $40 million in expected distributions, according to the statement.

Enterprise GP will get 1.33 million Enterprise units to keep its ownership interest at 2 percent. About 30 percent of the company will be owned by Enterprise GP, Epco and related companies, the partnerships said.

Bloomberg News contributed to this story.

brett.clanton@chron.com

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