After re-reading the press release the terms of the exchange are 1.04 to 1 plus a dollar. So based on yesterday's close it comes to 26.75 so its pretty much at the market price..not much of a premium but above 2 months ago. But mlps are all up from their early March lows. Teppco is thinking about it.
GDP was a horror down 6.1 but its already in the wash.
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3 comments:
According to my calculations, unitholders will suffer a decline in distributions with this deal. TPP currently pays about 10.75%, while EPD currently pays about 8.65%. The $1.00 sweetener corrects for that for a little more than one year. After that, EPD would have to considerably up its payout to make up the difference.
Given that TPP has been remarkably well managed, given the current downturn, I'm not particularly happy with the deal. Although TPP's distribution has been slow growing, it hasn't been cut either and its share price has been more stable than most during this awful time.
Anyone else have an opinion?
steve
As the owner of a few shares of TPP, I think the offer is inadequate, and the TPP board apparently agrees. Quote from the linked to article, "After considering Enterprise’s offer with the assistance of its financial and legal advisors, the special committee has unanimously concluded that it does not support the proposal as it now stands and has advised Enterprise of its decision. However, the special committee remains willing to consider a revised proposal that appropriately recognizes the value of TEPPCO, including the significant benefits that would accrue to Enterprise as a result of a merger with TEPPCO."
If share holders get a chance to vote, my vote is against the current offer.
JCarroll
Doing a little more analysis, TPP closed yesterday at $26.10. TPP is up 5% or so right now, probably based on takeover speculation. The AMZ, assumed to be a fair value of MLPs, is currently up 1.17%. Adjusting TPP up from yesterday's close by 1.17% gives a presumably fair value of $26.41. Dividing EPD's current price of $24.28 (down, presumably due to the anticipated dilution caused by issuance of new shares) into TPP's current fair price of $26.41 produces 1.09; so a fair exchange is, by my calculation 1.09 shares of EPD per 1 share of TPP. Next, to get a fair value, you have to add the "sweetener" noted in Steve's comment above; $2.00 seems more reasonable than the $1.00 offered due to the difference in distribution yields. Finally, a premium which recognizes the benefits EDP will receive must be added; 25% seems reasonable. Doing the math: (1.09 + .25) = 1.34 EDP shares per TPP share, + $2.00 per share for the yield differential, seems reasonable to me.
JCarroll
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