Energy Transfer to acquire rival midstream company SemGroup for $5.1bn

Energy Transfer acquisition of SemGroup : US midstream energy company Energy Transfer has agreed to acquire SemGroup for a total consideration of approximately $5.1 billion, including the assumption of debt and other liabilities.

SemGroup, which is headquartered in Tulsa, Oklahoma, operates a network of pipelines, processing plants, refinery-connected storage facilities and deep-water marine terminals across North America, including western Canada, the Mid-Continent and the Gulf Coast.

Energy Transfer acquisition of SemGroup will add the Houston Fuel Oil Terminal (HFOTCO) to the former’s portfolio, and increase its scale across multiple regions and its crude oil and LNG transportation business in the Rockies and Mid-Continent.

The Houston Fuel Oil Terminal is a crude oil terminal on the Houston Ship Channel with 18.2 million barrels of crude oil storage capacity, five deep-water ship docks and seven barge docks.

The Texas-based Energy Transfer is also planning to construct of the 75-mile long Ted Collins Pipeline, a new crude oil pipeline, to connect the Houston Fuel Oil Terminal and its own Nederland Terminal.

Energy Transfer acquisition of SemGroup – Map showing the combined assets of the two companies. Graphic courtesy of Business Wire

Under the merger agreement, Energy Transfer will also gain crude oil gathering assets in the DJ Basin in Colorado and the Anadarko Basin in Oklahoma and Kansas through the acquisition of SemGroup.

Additionally, the midstream energy company will get to own crude oil and natural gas liquids pipelines connecting the DJ Basin and Anadarko Basin with crude oil terminals in Cushing, Oklahoma.

Complementing Energy Transfer’s existing crude oil and NGL transportation business in the Permian Basin, the transaction will also enhance the company’s crude oil gathering and transportation presence in the Alberta Basin in western Canada.

As per the terms of Energy Transfer acquisition of SemGroup, the latter’s shareholders will exchange each of their shares for a payment of $6.80 per share in cash and 0.7275 of the former’s shares.

Commenting on Energy Transfer acquisition of SemGroup, Carlin Conner – CEO of SemGroup said: “This strategically and financially compelling combination will result in SemGroup joining one of the largest midstream energy companies in the country, with a strong footprint in all major U.S. production basins.

“The combined entity’s size, scale and financial profile will ensure that SemGroup’s assets, including our Gulf Coast terminal, mid-continent footprint and our Canadian joint venture SemCAMS Midstream, benefit from significant growth well into the future. We look forward to leveraging the increased pipeline connectivity and expanded terminalling infrastructure that the combined entity provides.”

The combined entity anticipates generating over $170 million of annual run-rate synergies, including commercial and operational synergies of $80 million, financial savings of $50 million and cost savings of $40 million.

BofA Merrill Lynch is the financial advisor to Energy Transfer, while Latham & Watkins is the legal counsel. For SemGroup, Jefferies is the financial advisor, while Kirkland & Ellis is the legal counsel.

Energy Transfer acquisition of SemGroup, which is subject to regulatory approvals, SemGroup’s shareholders’ approval, and other customary closing conditions, is expected to close by this year-end or early next year, as per the latest energy acquisition news.