Image: Magellan Midstream Partners soars on a takeout offer from ONEOK, Inc.
By Brian Nelson, CFA
We’re as happy as we can be to see a midstream energy master limited partnership (MLP) takeout. On Sunday, May 14, it was publicly announced that Magellan Midstream (MMP) would be bought by ONEOK, Inc. (OKE) in a cash and stock deal worth ~$18.8 billion including assumed debt. According to the deal terms, the transaction would give $25 per share in cash and 0.667 common share of ONEOK for each MMP common unit. Though many are questioning the rationale behind the deal, energy infrastructure rollups continue to reduce the number of energy MLPs trading on public markets, as we predicted years ago.
Units of Magellan are up more than 20% so far in 2023 while the Alerian MLP ETF (AMLP) has advanced just ~4%, and we can’t complain at all. However, we’re not sticking around to accept any integration risk with respect to the proposed ONEOK-Magellan tie-up. Don’t get us wrong though—we like Magellan when it comes to energy MLPs. But we’ll take the nice takeout price any day of the week. We expect to remove Magellan Midstream and Life Storage (LSI), which is expected to be bought by Extra Space Storage (EXR), from the High Yield Dividend Newsletter portfolio in the publication’s next edition, to be released June 1. We’ll be dropping coverage of MMP soon.
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Did You Know? The Dividend Cushion ratio has done a fantastic job both in identifying strong dividend paying companies and anticipating dividend cuts, “Efficacy of the Dividend Cushion Ratio.
Energy pipeline MLPs have significantly reduced their capital-market dependency risks during the past several years. Read more here: Energy Pipelines: What a Difference A Few Years Have Made!
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Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, BITO, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, and RSP. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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