(Reuters) – Pipeline company Targa Resources Corp and its unit Targa Resources Partners LP said they would buy Atlas Energy LP and Atlas Pipeline Partners LP for $5.9 billion, excluding debt.
Targa Resources Corp, which said in June it ended merger talks with Energy Transfer Equity LP, will buy Atlas Energy for $1.9 billion after Atlas spins off its non-midstream assets.
Master limited partnerships (MLPs), constantly under pressure to grow shareholder distributions, have been very active deal makers. MLPs pay very little taxes and distribute most of their earnings to shareholders.
Targa Resources said it expects its distributions to grow by about 35 percent next year after the deal closes, while Targa Resources Partners is targeting distribution growth of 11-13 percent after the $4 billion deal closes.
Targa Resources Partners said its offer was worth $38.66 per Atlas Pipeline in cash and stock and that its unitholders would own about two-thirds of the combined partnership.
The offer is at a 15 percent premium to Atlas Pipeline’s Friday close. Atlas Pipeline shares were up 9 percent at $36.72 in early trading.
Atlas Energy unit-holders will receive $9.12 in cash and 0.1809 of a share of Targa Resources and a pro-rata share in Energy’s distributed non-midstream assets.
Targa Resources Corp said it would buy the company with its current shareholders owning about 80 percent of the combined company.
Atlas Energy shares were up 20 percent at $38.87.
Citi was Atlas’s financial adviser. Evercore Partners acted as financial adviser to Targa Resources Partners, while Wells Fargo Securities LLC advised Targa Resources Corp. (Reporting by Anannya Pramanick and Swetha Gopinath in Bangalore; Editing by Savio D’Souza and Don Sebastian)