In the last part of this series, we discussed the highlights of the merger between MarkWest Energy Partners (MWE) and MPLX LP (MPLX). In this part of the series, we’ll analyze the terms of the merger agreement.
Under the terms of the merger, each MarkWest Energy common unitholder would receive 1.09 MPLX common units, plus a one-time cash payment of $3.37 per MarkWest Energy common unit. The one-time cash payment is to compensate MarkWest Energy unitholders for the fall in their quarterly distribution after the merger. MarkWest Energy and MPLX’s annualized distributions in 1Q15 were $3.64 and $1.64, respectively.
The 1.09x exchange ratio and $3.37 per MarkWest Energy common unit add to a total implied price of $78.64 for each MarkWest Energy common unit. This represents an ~31.60% premium to MarkWest Energy’s closing price on July 10, 2015.
Sources of funds
Marathon Petroleum (MPC) is MPLX’s sponsor. It will contribute $675 million to fund the one-time cash payment. MPLX will issue ~218 million common units to MarkWest Energy unitholders.
According to the press release, the transaction is expected to close in 4Q15. The transaction is “subject to approval by MarkWest unitholders and to customary closing conditions and regulatory approvals.”
Key ETFs and stocks
Some of the recent cash and stock deals in the midstream sector include Kinder Morgan’s (KMI) acquisition of Kinder Morgan Energy Partners and El Paso Pipeline Partners for $48.88 billion and $10.27 billion, respectively. Enterprise Product Partners (EPD) acquired Oiltanking Partners LP for $4.59 billion. Also, Targa Resources Partners (NGLS) acquired Atlas Energy LP for $4.83 billion.
Together, Enterprise Product Partners, Targa Resources Partners, and MarkWest Energy account for 23.63% of the Alerian MLP ETF (AMLP).