Equitrans (ETRN) To Acquire EQGP Holdings, Simplify Structure
Zacks Investment Research | Dec 02, 2018 09:57PM ET
Equitrans Midstream Corporation (NYSE:ETRN) recently agreed to acquire all outstanding units of EQGP Holdings, LP (NYSE:EQGP) for $20 per unit through a private purchase. The cash deal represents a 17.5% premium on EQGP Holdings’ price of $17.02 on Nov 29. The transaction is expected to close on the last day of this year, following which the acquirer will hold more than 95% of EQGP Holdings’ units.
Equitrans’ shares have seen a decline of 3% while EQGP Holdings’ units have rallied 17.6% since the news hit the market. Equitrans plans to implement its Limited Call Right and acquire the remaining units of EQGP Holdings at no less than the same price, after the private purchase is over. The second purchase, expected to be a taxable one for EQGP Holdings’ unitholders, will likely close in the first month of 2019. Equitrans had issued a Term Loan B, the cash proceeds of which will be utilized to back the acquisition.
Equitrans also intends to acquire 95 million units of EQM Midstream Partners, LP (NYSE:EQM) and a non-economic general partner interest in the same. The company is ready to trade its incentive distribution rights (IDR) and economic GP interest in EQM Midstream in exchange of the units. The transaction is expected to materialize by the January-March period of 2019.
The proposed transactions are expected to streamline and uncomplicate the corporate structure of the company. Following the closing of the transductions, Equitrans is expected to own 61% interest in EQM Midstream, while the rest will be held by the public. EQGP Holdings will not be held publicly. The transactions are expected to pave way for EQM Midstream’s 6-8% annual distribution growth. Moreover, Equitrans’ annual dividend is expected to increase 8-10% in the long run.
The figure below provides a better understanding of the proposed structure.
Equitrans spun off from EQT Corporation (NYSE:EQT) in mid-November. Since its ticker ETRN started trading in NYSE, the stock climbed 6.9% compared with 1.8% collective growth of the Zacks Investment Research
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