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Crestwood (CMLP) Announces Merger With Inergy

 May 06, 2013 07:36 AM

(By Balachander) Crestwood Midstream Partners LP (NYSE: CMLP), Inergy L.P. (NYSE: NRGY) and Inergy Midstream L.P. (NYSE: NRGM) have agreed to merge through a series of transactions, creating a midstream energy partnership with a total enterprise value of roughly $7 billion. 

Houston, Texas based Crestwood is a growth-oriented, midstream master limited partnership which owns and operates predominately fee-based gathering, processing, treating and compression assets servicing natural gas producers. Kansas City, Missouri-based Inergy L.P.'s operations include a natural gas storage business in Texas and an NGL supply logistics, transportation and marketing business. Inergy Midstream is engaged in the development and operation of natural gas, NGL and crude oil storage, transportation, and logistics businesses. 

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Under the terms of the agreement, Crestwood will acquire the general partner of Inergy L.P. for $80 million in cash in the first transaction. 

In the second deal, Crestwood will contribute to Inergy L.P. 100 percent of its interest in Crestwood Gas Services GP LLC in exchange for 35.1 million common units and 4.4 million subordinated units of Inergy L.P.

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In the final transaction, Crestwood Midstream will be merged into a subsidiary of Inergy Midstream. Crestwood Midstream unitholders will receive 1.070 units of Inergy Midstream for each unit of Crestwood Midstream they own. In addition, all Crestwood Midstream public unitholders other than Crestwood Holdings will receive a one-time cash payment at closing of roughly $35 million in the aggregate, or $1.03 per unit, $25 million of which will be payable by Inergy Midstream and about $10 million of which will be payable by Crestwood Holdings. 

The pro forma enterprise is expected to generate around $450 million of 2013 estimated EBITDA and to have a total enterprise value of greater than $7 billion, including both Inergy L.P. and Inergy Midstream.

The companies expect to fully realize financial synergies of about $15 million to $20 million on an annual run rate within the next 24 months.

CMLP shares ended Friday's regular trading at $23.85. NRGY closed at $22.30, while NRGM ended at $24.55.

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