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Targa Said to Abandon Sale to Energy Transfer After Share Spike

Targa Resources Corp. and its operating unit called off a sale to Energy Transfer Equity LP (ETE) after news of the potential $15 billion deal sent Targa’s shares surging, making its board question whether the offer was high enough, people with knowledge of the matter said.

The combined market value of Targa Resources and its subsidiary, Targa Resources Partners LP (NGLS), swelled to about $16 billion on June 19 after Bloomberg News reported the talks, from more than $13 billion the day before. Energy Transfer was nearing a deal to buy the companies for more than $15 billion in cash and stock, people familiar with the situation said.

While Energy Transfer remains willing to do the deal, Targa is reluctant, said the people, who asked not to be identified because the matter is private. The report about a deal being near also hampered negotiations by raising suspicions that the talks were intentionally leaked to influence the sale process, the people said. Before the deal was halted, Energy Transfer had been out seeking debt to finance the purchase, one person said.

Jennifer Kneale, a spokeswoman for Targa, and Vicki Granado, a spokeswoman for Energy Transfer, didn’t respond to two phone calls seeking comment.

The deal would be the largest ever orchestrated by billionaire Kelcy Warren, who expanded Energy Transfer through a $13 billion buying spree in 2010 and 2011 into the country’s fourth-biggest pipeline company, according to data compiled by Bloomberg. The U.S. shale-fracking boom is increasing fuel supplies and propelling deals among the companies that transport oil and natural gas.

Energy Transfer is organized as a master limited partnership, or MLP, which pays no federal income taxes as long as it doles out most of its cash to shareholders. The structure encourages the partnerships to make acquisitions to appease growth-hungry investors who expect increasingly larger dividends.

Future Talks?

Targa released a statement June 19 saying “high level preliminary” talks with Energy Transfer had been terminated.

“There are no assurances whether or not discussions could resume or whether any agreement could be entered into in the future,” Targa said then.

Targa Resources Corp. (TRGP) is the general partner of Targa Resources LP, which means it oversees its operations and is entitled to a portion of the cash it distributes every quarter, according to regulatory filings.

Targa Resources Corp., based in Houston, rose about 2 percent yesterday in New York to $140.83, giving it a market value of almost $6 billion, while Targa Resources Partners LP climbed 2.8 percent to $72.10, giving it a value of $8.4 billion. Energy Transfer Equity increased less than 1 percent to $54.89, for a market value of almost $30 billion.

To contact the reporters on this story: Matthew Monks in New York at mmonks1@bloomberg.net; Jeffrey McCracken in New York at jmccracken3@bloomberg.net

To contact the editors responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net Elizabeth Wollman

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