Natural gas pipeline company Targa Resources (TRC) has signed an agreement to acquire undisclosed stake in Targa Resources Partners (TRP) for about $6.7bn.
Under the terms of the deal, TRC will acquire the remaining stake in the Targa Resources Partners by issuing 0.62 shares of TRC per unit in all equity transaction to TRP unitholders.
TRC already owns 8.8% stake in Targa Resources Partners.
Upon completion of the deal, TRC will completely own Targa Resources Partners, which will no longer be publicly traded, while the TRP’s incentive distribution rights will be eliminated.
The deal is a part of TRC’s effort to improve coverage and credit profile, simplify structure, reduce capital cost, and improve retained cash flow in order to continue to invest in high-return growth projects.
TRC CEO Joe Bob Perkins said: "The combination of TRC and TRP will provide both immediate and long-term benefits to TRC and TRP investors.
"This transaction is attractive for Targa’s stakeholders, with better positioning in lower commodity price environments and enhanced growth in price recovery scenarios."
The transaction, which is planned to be completed in the first quarter of 2016, is subject to customary approvals and conditions including the expiration or termination of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act.
Additionally, the deal is contingent to approval of the stakeholders of the two firms.
Targa expects the deal to drive dividend growth of 15% for 2016 and more than 10% compound annual dividend growth through 2018.
Established in October 2006 by Targa Resources, Targa Resources Partners is a publicly traded Delaware limited partnership intended to own, operate, acquire and develop a diversified portfolio of complementary midstream energy assets.
Image: Targa expects 15% of dividend growth for 2016 with the acquisition of Targa Resources Partners. Photo: courtesy of supakitmod/FreeDigitalPhotos.net.