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SemGroup Falls After Suitor Plains Agrees to Buy BP Assets

SemGroup Corp. (SEMG), the oil and natural- gas pipeline company that’s the target of a $1 billion buyout attempt by Plains All American Pipeline LP (PAA), fell after Plains agreed to pay $1.67 billion in cash for BP Plc (BP/)’s Canadian gas- liquids operations.

SemGroup, based in Tulsa, Oklahoma, fell 6.9 percent, the most in more than three months, to close at $26.19 in New York.

Plains, based in Houston, today announced it would pay $1.67 billion for BP’s gas-liquids business that includes 4,000 kilometers (2,500 miles) of pipelines, 21 million barrels of storage capacity and three plants that separate gas liquids such as propane, a fuel, and ethane, a plastics ingredient.

The pipeline company previously offered SemGroup’s shareholders $24 a share, or $1 billion, after the board rejected the offer or “constructive discussions,” Plains said in an Oct. 24. statement. SemGroup closed at $23.45 the trading day before that announcement. Plains reiterated the $24 a share offer for SemGroup Nov. 16.

“It wasn’t going to get done at $24 with SemGroup trading at $28,” Bernard Colson, a Kansas City, Missouri-based analyst for Oppenheimer & Co., said today in an interview. SemGroup closed at $28.15 yesterday. Colson rates Plains “outperform,” doesn’t rate SemGroup and owns neither.

“If you don’t have that supporting bid at $24, people are kind of questioning whether anyone else will step in,” he said.

Bid Rejected

SemGroup, which owns 2,800 miles of pipelines along with crude-oil storage tanks, rejected the bid, saying it undervalued the company. On Oct. 28, SemGroup adopted a shareholder rights plan designed to fend off a hostile bid.

Plains Chief Executive Officer Greg Armstrong today on an investor call declined to discuss the offer for SemGroup, citing advice from lawyers. Liz Barclay, a spokeswoman for SemGroup, declined to comment.

SemGroup said today it plans to raise about $140 million from an initial public offering of Rose Rock Midstream LP, owner of storage terminals and pipelines in Oklahoma, Kansas, and North Dakota. Rose Rock will offer 7 million shares at $19 to $21 each.

Plains rose 1.7 percent to close at $65.98.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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