8-K: ONEOK to Acquire Remaining EnLink Midstream Units in $4.3 Billion Stock Deal

ONEOK will acquire all outstanding publicly held common units of EnLink Midstream for $4.3 billion in ONEOK common stock, with each EnLink unit converting into 0.1412 shares of ONEOK stock.

Summary

• ONEOK, Inc. and EnLink Midstream, LLC have entered into a definitive merger agreement.
• ONEOK will acquire all outstanding publicly held common units of EnLink for $4.3 billion in ONEOK common stock.
• Each outstanding EnLink common unit will be converted into 0.1412 shares of ONEOK common stock.
• The exchange ratio was determined by dividing EnLink's market close price on November 22, 2024, of $15.75 per unit by ONEOK's 10-day volume-weighted average price.
• ONEOK will issue approximately 37.0 million shares in the transaction, representing about 6.0% of total outstanding shares post-transaction.
• The EnLink Conflicts Committee and Board unanimously approved the transaction.
• The transaction is expected to close in the first quarter of 2025, pending customary closing conditions and unitholder approval.
• ONEOK has committed to vote its 44% stake in favor of the transaction.
• No ONEOK shareholder vote is required.
• The transaction is expected to be tax-free and accretive to ONEOK shareholders.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook on the merger, highlighting its strategic benefits and expected financial gains. The language is optimistic and confident, suggesting a strong belief in the success of the transaction. However, the document also acknowledges potential risks, which is a balanced approach.

Positives

• The transaction is expected to be accretive to ONEOK shareholders.
• EnLink unitholders will gain significantly greater trading liquidity.
• EnLink unitholders will receive an attractive dividend yield.
• The transaction is tax-free.
• The merger will further solidify ONEOK's position as a premier energy infrastructure company.
• The merger will allow ONEOK to expand and extend its value chain.

Risks

• There is a risk that ONEOK will not be able to successfully integrate EnLink's business.
• Cost savings, synergies, and growth from the transaction may not be fully realized or may take longer than expected.
• Credit ratings following the transaction may differ from what ONEOK expects.
• A condition to closing may not be satisfied, or the merger agreement may be terminated.
• EnLink unitholders may not approve the transaction.
• There is a risk of adverse reactions or changes to business or employee relationships.
• Changes in ONEOK's capital structure could negatively affect the market value of its securities.
• There are risks related to retaining customers and key personnel.
• The transaction could distract management teams from ongoing business operations.
• Economic downturns and commodity price declines could impact the transaction.
• Changes in governmental regulations could impact the transaction.

Future Outlook

The transaction is expected to close in the first quarter of 2025, pending customary closing conditions and unitholder approval. The merger is expected to be accretive to ONEOK shareholders and provide EnLink unitholders with greater trading liquidity and an attractive dividend yield.

Management Comments

• Pierce H. Norton II, ONEOK president and chief executive officer, stated that the transaction is expected to be accretive to ONEOK shareholders and provide EnLink unitholders with significantly greater trading liquidity and an attractive dividend yield.
• Norton also mentioned that this step further solidifies ONEOK's status as a premier energy infrastructure company, allowing them to expand their value chain and create value for stakeholders.

Industry Context

This acquisition is part of a broader trend of consolidation in the midstream energy sector, as companies seek to expand their infrastructure and streamline operations. ONEOK's acquisition of the remaining EnLink units follows its previous acquisition of GIP's interest in EnLink, indicating a strategic move to fully integrate EnLink's assets and operations into ONEOK's portfolio.

Comparison to Industry Standards

• The transaction structure, using a stock-for-unit exchange, is a common approach in the midstream sector for mergers and acquisitions.
• The exchange ratio is based on a recent market price and a volume-weighted average price, which is a standard method for determining fair value in such transactions.
• The deal is structured as a tax-free transaction, which is typical for mergers in the energy sector to minimize tax liabilities for both companies and their investors.
• The expected closing timeline of the first quarter of 2025 is consistent with the typical timeframe for mergers of this size, which require regulatory filings and unitholder approvals.
• The involvement of independent financial advisors and legal counsel for both parties, particularly the EnLink Conflicts Committee, is a standard practice to ensure fairness and transparency in the transaction.

Stakeholder Impact

• ONEOK shareholders are expected to benefit from the accretive nature of the transaction.
• EnLink unitholders will receive ONEOK stock, providing them with greater trading liquidity and an attractive dividend yield.
• Employees of both companies will be impacted by the integration process, with potential changes to roles and responsibilities.
• Customers and suppliers of both companies may experience changes in their relationships as a result of the merger.

Next Steps

• EnLink unitholder vote to approve the merger.
• Filing of the Registration Statement with the SEC.
• Mailing of the proxy statement/prospectus to EnLink unitholders.
• Completion of customary closing conditions.
• Integration of EnLink into ONEOK.

Key Dates

Keywords

ONEOK, EnLink Midstream, merger, acquisition, common units, stock transaction, midstream, energy infrastructure, shareholders, unitholders