UPDATE: Teppco Rejects Bid From Enterprise Products Partners
April 29 2009 - 1:09PM
Dow Jones News
Enterprise Products Partners LP (EPD) on Wednesday made public a
proposal to acquire Teppco Partners (TPP) in a deal worth $2.8
billion that would combine oil and gas pipeline firms linked to
Houston billionaire Dan Duncan.
Teppco has rejected the offer.
Enterprise and Teppco are both master limited partnerships, or
MLPs, a form of tax-advantaged publicly traded company owned by
partners. Houston-based Enterprise owns natural-gas and crude-oil
pipelines, processing plants and storage facilities. Teppco, also
based in Houston, owns gas, oil and refined-petroleum
pipelines.
Enterprise is offering to buy all of Teppco's outstanding
partnership interests for $21.89 a unit, a premium of about 4.8%
based on the 10-day average closing prices of Teppco and Enterprise
common units on March 6, the day before Enterprise made the
proposal to Teppco. A common unit represents a limited-partner
interest in an MLP.
A special committee formed by Teppco's general partner - Texas
Eastern Products Pipeline Co., the company that manages Teppco -
"has unanimously concluded that it does not support the proposal as
it now stands and has advised Enterprise of its decision," Teppco
said in a statement.
Teppco said it's willing to consider a revised offer from
Enterprise, however.
Enterprise and Teppco already have a relationship, although they
are independent companies with separate boards of directors. Teppco
and Enterprise's general partners are owned by the same company,
Enterprise GP Holdings LP (EPE), which was founded by Duncan. EPE
owns 4.2% of Teppco's outstanding units and about 3% of
Enterprise's outstanding units.
The proposed deal would allow Enterprise to diversify its
business and lower its risk profile on the cheap, analysts said.
Teppco has been hit hard by falling commodity prices, losing almost
half its market value in 2008.
The companies said they won't comment further on acquisition
discussions unless a definitive agreement is reached. Rick Rainey,
the spokesman for both Enterprise and Teppco, couldn't be reached
for comment.
"Enterprise probably just views this as the time to propose such
a transaction with the downturn in the commodity price
environment," said Mark Reichman, an analyst with SMH Capital in
Houston. Teppco has experienced some management shake-ups recently
with the resignation of its chief financial officer in January and
the announcement in March that Teppco's president and chief
executive, Jerry Thompson, was taking a temporary medical leave of
absence.
"We suspect the offer to acquire Teppco may be a bit of
gamesmanship: A successful bid would win full control of Teppco on
the cheap, while an unsuccessful bid would underscore the idea that
Teppco is undervalued," wrote Jason Stevens, an analyst with
Morningstar Inc., in a note to clients Wednesday.
Teppco and Enterprise said last week that the companies decided
not to become part of the Texas Offshore Port System Partnership, a
project that includes an offshore port, two onshore crude oil
storage facilities and an associated pipeline system, after a
disagreement with the third partner in the deal.
-By Christine Buurma, Dow Jones Newswires; 201-938-2061;
christine.buurma@dowjones.com
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