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Investors Approve ONOEK-Magellan Merger

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The Daley Note: September 22, 2023

ONEOK (OKE) and Magellan Midstream Partners (MMP) stakeholders have voted to approve the $18.8B merger of the two midstream companies.

Despite vocal opposition from some Magellan investors, MMP owners voted 76% of their units in favor of the merger in a special meeting, or 55% of the outstanding MMP units. OKE shareholders voted 96% of their shares in favor of the transaction in a separate meeting, the companies said. OKE and MMP aim to close the merger on September 25.

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East Daley Analytics explored the OKE-MMP combination in May after the companies brokered the deal. At the time, ONEOK claimed $100-300MM in potential synergies once it acquired MMP. Using our OKE and MMP Financial Blueprints, we put these claims to the test.

The merger creates scale for ONEOK to compete with the top midstream companies, yet also combines operations with virtually no overlap. MMP will add considerable geographic diversification for OKE, reducing its exposure in the Bakken and Anadarko from 85% to 60%. However, OKE’s Permian exposure doubles from 10% to 20% (see chart).

Despite the limited asset overlap, OKE could see several interesting commercial opportunities emerge from the combo. EDA is most excited about the potential synergies from MMP’s butane blending business once OKE levers its extensive NGL pipeline and storage network for feedstock. Magellan also has interests in three terminals on the Houston Ship Channel that could serve as a future launch pad for NGL exports.

ONEOK and Magellan could finalize the merger as soon as September 25. East Daley is currently combining the OKE and MMP Financial Blueprints for clients to reflect the $18.8B deal. – Ajay Bakshani, CFA and Andrew Ware Tickers: MMP, OKE.



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