425: EnLink Midstream Addresses Litigation and Provides Supplemental Disclosures Regarding ONEOK Merger

EnLink Midstream has released supplemental disclosures related to its merger with ONEOK, addressing litigation from unitholders and providing additional financial analysis details.

Summary

• EnLink Midstream, LLC is undergoing a merger with ONEOK, Inc., with ONEOK acquiring EnLink through a series of mergers.
• Following the filing of the merger registration statement, EnLink received demand letters and three complaints from unitholders alleging disclosure deficiencies in the proxy statement/prospectus.
• EnLink believes the allegations are without merit but is providing supplemental disclosures to avoid delays and minimize legal expenses.
• The supplemental disclosures include additional details on the discounted cash flow analysis, public companies trading analysis, and precedent M&A transaction analysis performed by Evercore, EnLink's financial advisor.
• The discounted cash flow analysis for EnLink resulted in an implied equity value per unit range of $13.92 to $22.86, while the precedent M&A transaction analysis resulted in a range of $11.92 to $18.01.
• The document also includes additional information on the valuation of ONEOK, including discounted cash flow analysis and public companies trading analysis.
• The EnLink Board and Conflicts Committee unanimously recommend that unitholders vote in favor of the merger.
• The document also clarifies that no new compensation arrangements have been established or discussed with EnLink's executive officers by ONEOK.

Sentiment

Score: 4

Explanation: The document is primarily focused on addressing litigation and providing supplemental disclosures, which indicates potential issues with the initial merger process. While the board recommends the merger, the litigation and need for additional disclosures create a negative sentiment.

Positives

• The EnLink Board and Conflicts Committee unanimously recommend that unitholders vote for the merger, indicating strong support from leadership.
• EnLink is proactively addressing unitholder concerns by providing supplemental disclosures, which may help to avoid delays and reduce legal costs.
• The document provides detailed financial analysis from Evercore, offering transparency into the valuation process.

Negatives

• The merger is facing litigation from unitholders, which could potentially delay or complicate the transaction.
• The supplemental disclosures suggest that the initial proxy statement/prospectus may have had some deficiencies, even though EnLink denies any wrongdoing.
• The implied equity value ranges from the financial analysis are below the exchange ratio of 0.1412x in some cases, which could be a concern for some unitholders.

Risks

• The ongoing litigation from unitholders could delay or prevent the merger from being completed.
• There is a risk that additional similar complaints or demand letters may be received by EnLink.
• The integration of EnLink's business into ONEOK may not be successful, and cost savings and synergies may not be fully realized.
• Changes in ONEOK's capital structure could have adverse effects on the market value of its securities.
• There are risks related to retaining customers and key personnel, and maintaining relationships with suppliers and customers.
• The transaction could distract management teams from ongoing business operations or cause substantial costs.
• Economic downturns and declines in commodity prices could negatively impact the combined company.
• Changes in governmental regulations could also pose a risk.

Future Outlook

The document contains forward-looking statements regarding the expected closing of the transaction and the combined operations of ONEOK and EnLink. However, it also highlights various risks and uncertainties that could cause actual results to differ materially from these statements.

Management Comments

• The Board of Directors of the Manager (the EnLink Board) and the Conflicts Committee of the EnLink Board unanimously recommend that the EnLink unitholders vote FOR the merger proposal.
• EnLink believes that the allegations contained in the Demand Letters and the Complaints are without merit.

Industry Context

The merger between EnLink and ONEOK is part of a broader trend of consolidation in the midstream energy sector. The document references several comparable companies and partnerships in the gathering and processing and large-cap/diversified midstream spaces, such as Antero Midstream, DT Midstream, Hess Midstream, Kinetik Holdings, Targa Resources, Western Midstream, Energy Transfer, Enterprise Products Partners, Kinder Morgan, MPLX, and The Williams Companies.

Comparison to Industry Standards

• The document provides a detailed comparison of EnLink's valuation to its peers using Enterprise Value to EBITDA multiples.
• For gathering and processing companies, the 2025 EBITDA multiples range from 9.0x to 12.9x, and 2026 multiples range from 8.3x to 12.0x.
• For large-cap/diversified midstream companies, the 2025 EBITDA multiples range from 8.5x to 13.4x, and 2026 multiples range from 8.3x to 12.7x.
• These multiples are used to assess the reasonableness of the merger terms and provide context for EnLink's valuation.

Legal Proceedings

• EnLink has received several demand letters and three complaints from purported unitholders alleging disclosure deficiencies in the proxy statement/prospectus.
• The complaints are captioned as John Thompson v. EnLink Midstream, LLC, et al., William Johnson v. EnLink Midstream, LLC, et al., and Robert Garfield v. EnLink Midstream, LLC, ONEOK, Inc., et al.

Stakeholder Impact

• Shareholders are impacted by the merger and the litigation, and their vote is required for the merger to proceed.
• Employees may be impacted by the integration of the two companies.
• Customers and suppliers may be impacted by changes in the combined company's operations.

Next Steps

• EnLink unitholders will vote on the merger proposal at a special meeting.
• The merger is subject to the satisfaction of certain conditions.
• The companies will continue to work towards closing the transaction.

Key Dates

Keywords

Merger, ONEOK, EnLink Midstream, Litigation, Supplemental Disclosures, Proxy Statement, Financial Analysis, Discounted Cash Flow, M&A Transaction, Unitholders