Empresas y finanzas

Enterprise Products to buy Enterprise GP for $8 billion

By Thyagaraju Adinarayan

BANGALORE (Reuters) - Pipeline operator Enterprise Products Partners LP Tuesday said it will buy holding company Enterprise GP Holdings LP for $8.03 billion, the second such deal in a month, to simplify its corporate structure and reduce capital costs.

On August 9, propane distributor Inergy LP agreed to buy Inergy Holdings LP for $2.09 billion.

Houston-based Enterprise Products, a midstream energy services provider, now joins a list of master limited partnerships, including Buckeye , Magellan and Inergy, who have combined their holding company to do away with incentive distributions.

"(The deal) is really a function of having a more competitive capital structure and being able to consummate deals," Oppenheimer & Co analyst Bernard Colson said.

"This is a trend that continues, not many of these general partners last long," Colson said. "The deal is a big positive in the long-term."

However, on a conference call with analysts, Enterprise Products said the deal would reduce cash flow by about 1.5 percent in 2011 and 1 percent in 2012.

Certain affiliates of privately held Enterprise Products Co (EPCO), which owns about 76 percent of Enterprise GP, will support the deal and continue to own the general partner of the combined entity.

EPCO will waive over $275 million of cash distributions, based on latest quarterly distribution, over a five-year period post-merger.

Enterprise GP Holdings and Enterprise Products were co-founded by Texas pipeline billionaire Dan Duncan, who died earlier this year.

WIN-WIN DEAL

Under the deal, Enterprise GP unitholders would receive 1.5 Enterprise Products common units in exchange for each Enterprise GP limited partner unit.

The deal values Enterprise GP at about $57.68 share, a premium of 16 percent to the stock's Friday close.

Enterprise GP's unitholders would have been entitled to about $312 million in annual distribution, based on the 139.2 million shares outstanding as of August 1 and a distribution of $2.24 per unit, according to Thomson Reuters data.

"We believe Enterprise GP unitholders will benefit from the immediate increase in the value of their post-merger partnership units and the distributions they will receive after the merger," Enterprise GP's Chief Executive Ralph Cunningham said.

Enterprise Products, valued at about $24.5 billion, said it would see cost synergies of about $6 million a year, primarily eliminating public company expenses associated with Enterprise

GP.

Enterprise Products Partners said it believes the merger will not impact its expected cash distribution growth rate in the near-term.

The costs saved on the incentive distribution will be invested in organic growth projects and acquisitions, it said.

Enterprise GP will become a unit of Enterprise Products.

Following the closing of the merger, expected during the fourth quarter, Enterprise Products Partners expects affiliates of EPCO and management to own about 39 percent of the outstanding common units.

Units of Enterprise Products Partners were down 1 percent at $38.00 in midday trade Tuesday on the New York Stock Exchange. Units of Enterprise GP, which have risen over 80 percent over the last 52 weeks, were up 12 percent at $55.82.

(Reporting by Thyagaraju Adinarayan in Bangalore; Editing by Maju Samuel)

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