A merger agreement has been announced by the Kansas City-based oil and natural gas pipeline operator Tallgrass Energy GP and Tallgrass Energy Partners.
Under the deal, Tallgrass Energy GP will acquire 47.6 million shares in Tallgrass Energy Partners. And unitholders of TEP will receive 2 TEGP Class A shares for each share they own.
Once the deal is finalized Tallgrass Energy GP will change its name to Tallgrass Energy, LP and will trade on the New York Stock Exchange under the ticker symbol “TGE.” And after the closing, Tallgrass energy does not expect to pay cash federal income taxes for at least 10 years.
“We are executing this transaction from a position of fundamental business strength, and the result is a win for the TEP unitholders and TEGP shareholders alike. This non-dilutive combination differentiates our transaction from most other recent combinations in the MLP universe,” said President and CEO David G. Dehaemers Jr.
The merger agreement has been unanimously approved by the Board of Directors of TEGP’s general partner, the Conflicts Committee of the Board of Directors of TEP’s general partner (the “TEP Conflicts Committee”) and the Board of Directors of TEP’s general partner. Subject to customary approvals and conditions, the merger is expected to close by the end of the second quarter of 2018.
In the proposed transaction, TEGP will issue an aggregate of approximately 95.2 million Class A shares to former TEP common unitholders, representing approximately 62.1 percent of the outstanding Class A shares of TEGP following the transaction. The revolving credit facilities of TEP and Tallgrass Equity, and the senior notes of TEP are expected to remain outstanding following the merger. Assuming the merger closes on or before the record date for the second quarter 2018 dividend, former TEP unitholders holding TEGP Class A shares on the record date would be entitled to receive the second quarter 2018 dividend on the TEGP Class A shares they receive in the merger in accordance with TEGP’s agreement of limited partnership.