Plains All American Pipeline LP (PAA) agreed to buy all the shares of PAA Natural Gas Storage LP (PNG) it didn’t previously own after raising its offer 1.5 percent, in a deal that values the company at $2 billion.
PAA Natural Gas holders will receive 0.445 common units of Plains All American for each unit they own, the Houston-based gas-storage company said in a statement today. The agreement amounts to $23.07 a unit, a 4-cent premium for PAA Natural Gas investors, based on yesterday’s closing prices.
Plains, also based in Houston, is the largest holder of PAA Natural Gas with 46 percent of outstanding common units. The company controls the partnership, which began trading publicly in 2010, through ownership of its general partner. Plains offered to buy PAA Natural Gas in August, with holders receiving 0.435 units, or $22.74 a unit, a 7.9 percent premium at the time.
PAA Natural Gas, the owner and operator of three gas storage facilities in Louisiana, Mississippi and Michigan, has been in a “defensive posture” due to shrinking profit margins caused by seasonal differences in gas prices, President Dean Liollio said on an Aug. 6 conference call. Plains Chief Executive Officer Greg Armstrong said in August the next several years would be “challenging” for PAA Natural Gas if it remained on its own.
PAA Natural Gas, which reached a 52-week high of $23.59 last month, gained 0.8 percent to $23.21 at 10:25 a.m. in New York. Plains rose 0.9 percent to $52.32.
Roy I. Lamoreaux, a spokesman for Plains, declined to comment on the transaction.
Plains will issue about 14.7 million additional common units for the transaction, which the companies expect to close in the fourth quarter. Evercore Partners Inc. (EVR) advised on the deal.
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