Targa Resources Corp. and its operating unit called off a sale
to Energy
Transfer Equity LP (ETE)after news of the potential $15
billion deal sent Targa’s shares surging, making its board question whether
the offer was high enough, people with knowledge of the matter said.
The combined market value of Targa Resources and its subsidiary, Targa Resources Partners LP (NGLS), swelled to about $16 billion on June 19 after Bloomberg News reported the talks, from more than $13
billion the day before. Energy Transfer was nearing a deal to buy the companies
for more than $15 billion in cash and stock, people familiar with the situation
said.
While Energy Transfer remains willing to do the deal, Targa is
reluctant, said the people, who asked not to be identified because the matter
is private. The report about a deal being near also hampered negotiations by
raising suspicions that the talks were intentionally leaked to influence the
sale process, the people said. Before the deal was halted, Energy Transfer had
been out seeking debt to finance the purchase, one person said.
Jennifer Kneale, a spokeswoman for Targa, and Vicki Granado, a
spokeswoman for Energy Transfer,
didn’t respond to two phone calls seeking comment.
The deal would be the largest ever orchestrated by billionaire
Kelcy Warren, who expanded Energy Transfer through a $13 billion buying spree
in 2010 and 2011 into the country’s fourth-biggest pipeline company, according
to data compiled by Bloomberg. The U.S. shale-fracking boom is increasing fuel
supplies and propelling deals among the companies that transport oil and
natural gas.
Energy Transfer is organized as a master limited partnership, or
MLP, which pays no federal income taxes as long as it doles out most of its
cash to shareholders. The structure encourages the partnerships to make
acquisitions to appease growth-hungry investors who expect increasingly larger
dividends.
Future Talks?
Targa released a
statement June 19 saying “high level preliminary” talks with Energy Transfer
had been terminated.
“There are no assurances whether or not discussions could resume
or whether any agreement could be entered into in the future,” Targa said then.
Targa Resources Corp. (TRGP) is the general partner of Targa Resources
LP, which means it oversees its operations and is entitled to a portion of the
cash it distributes every quarter, according to regulatory filings.
Targa
Resources Corp., based in Houston, rose about 2 percent yesterday in New York to $140.83, giving it a
market value of almost $6 billion, while Targa Resources Partners LP climbed
2.8 percent to $72.10, giving it a value of $8.4 billion. Energy Transfer
Equity increased less than 1 percent to $54.89, for a market value of almost
$30 billion.
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