Plains All American Pipeline (PAA) is proposing to acquire PAA Natural Gas Storage (PNG), which owns and operates three natural gas storage facilities in Louisiana, Mississippi and Michigan, in a unit-for-unit exchange valued at approximately $1.39 billion, the companies said Tuesday. PAA already holds a general partner interest and majority equity ownership position in PNG.
"While PAA shares PNG's positive views about the intermediate- to long-term outlook for natural gas storage, it is difficult to predict the timing and extent of a recovery in natural gas storage market conditions," said PAA CEO Greg L. Armstrong. "Accordingly, it is clear that the next several years will be challenging for PNG on a stand-alone basis.
"We believe that the proposal provides an attractive opportunity for PNG's common unit holders to realize a value that reflects an appropriate balance between the intermediate to long term value of PNG's storage business and the uncertainty associated with a near-term challenging environment."
PAA is proposing to acquire all of PNG's outstanding publicly held common units, with total consideration of 0.435 common units of PAA for each PNG unit, in a transaction that would be structured as a merger of PNG with a PAA subsidiary. The proposed consideration represents a value of $22.74 per PNG unit, based on the trailing 10-day average closing price of PAA units through Aug. 26.
PAA owns approximately 28.2 million common units of PNG, which represents approximately 46% of PNG's issued and outstanding common units. PAA also owns PNG's general partner, all of PNG's incentive distribution rights, all of its Series A subordinated units (approximately 11.9 million units) and all of its Series B subordinated units (13.5 million units).
The proposed transaction is subject to the negotiation and execution of a definitive agreement and approval by PAA's board of directors, a conflicts committee to be established by PNG's board, and PNG unitholders.
PAA units, which have declined about 12% over the last three months, opened at $51.50 Wednesday, the same as its Tuesday open. PNG units, which had climbed 1.3% during the day Tuesday from $20.81 to $21.09, opened higher Wednesday at $22.57.
Plains All American Pipeline (PAA) is proposing to acquire PAA Natural Gas Storage (PNG), which owns and operates three natural gas storage facilities in Louisiana, Mississippi and Michigan, in a unit-for-unit exchange valued at approximately $1.39 billion, the companies said Tuesday. PAA already holds a general partner interest and majority equity ownership position in PNG.
"While PAA shares PNG's positive views about the intermediate- to long-term outlook for natural gas storage, it is difficult to predict the timing and extent of a recovery in natural gas storage market conditions," said PAA CEO Greg L. Armstrong. "Accordingly, it is clear that the next several years will be challenging for PNG on a stand-alone basis.
"We believe that the proposal provides an attractive opportunity for PNG's common unit holders to realize a value that reflects an appropriate balance between the intermediate to long term value of PNG's storage business and the uncertainty associated with a near-term challenging environment."
PAA is proposing to acquire all of PNG's outstanding publicly held common units, with total consideration of 0.435 common units of PAA for each PNG unit, in a transaction that would be structured as a merger of PNG with a PAA subsidiary. The proposed consideration represents a value of $22.74 per PNG unit, based on the trailing 10-day average closing price of PAA units through Aug. 26.
PAA owns approximately 28.2 million common units of PNG, which represents approximately 46% of PNG's issued and outstanding common units. PAA also owns PNG's general partner, all of PNG's incentive distribution rights, all of its Series A subordinated units (approximately 11.9 million units) and all of its Series B subordinated units (13.5 million units).
The proposed transaction is subject to the negotiation and execution of a definitive agreement and approval by PAA's board of directors, a conflicts committee to be established by PNG's board, and PNG unitholders.
PAA units, which have declined about 12% over the last three months, opened at $51.50 Wednesday, the same as its Tuesday open. PNG units, which had climbed 1.3% during the day Tuesday from $20.81 to $21.09, opened higher Wednesday at $22.57.
