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SemGroup Reiterates Rejection Of Plains All American Pipeline Unsolicited Proposal

SemGroup® Corporation (NYSE: SEMG) (“SemGroup” or the “Company”) today announced that it has sent a letter to Plains All American Pipeline, L.P. (NYSE: PAA) (“Plains All American”) reiterating SemGroup’s Board of Directors’ rejection of the unsolicited, unchanged proposal by Plains All American to acquire all of the outstanding shares of SemGroup for $24.00 per share in cash. Plains All American’s unsolicited proposal was originally made on October 6, 2011 and is $4.72 lower than the closing price of SemGroup on Tuesday, November 15, 2011.

Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisors, the SemGroup Board has reviewed the unsolicited, $24 per share proposal and determined that it substantially undervalued the Company and its future prospects. The SemGroup Board believes that the $24 per share proposal is opportunistic and does not provide any reasonable basis from which to begin discussions or negotiations with Plains All American.

The full text of the letter sent today to Greg L. Armstrong, Chairman and Chief Executive Officer of Plains All American follows:

             
November 17, 2011
 
Greg L. ArmstrongChairman and Chief Executive OfficerPlains All American Pipeline, L.P.333 Clay Street, Suite 1600Houston, Texas 77002
 
Dear Mr. Armstrong:
 
The Board of Directors of SemGroup Corporation has reviewed your letter dated November 16, 2011, which simply reiterates Plains All American Pipeline, L.P.’s unsolicited proposal to acquire all of the issued and outstanding Class A and Class B common stock of SemGroup for $24.00 per share in cash. As we explained in our letter of October 19, 2011, the SemGroup Board carefully reviewed Plains’ unsolicited proposal with the assistance of its financial and legal advisors and determined that it substantially undervalues SemGroup and its future prospects.
 
The SemGroup Board continues to believe that your current proposal is opportunistic and fails to adequately reflect SemGroup’s bright prospects for stockholder value creation. We take our fiduciary duties very seriously and will consider any bona fide acquisition proposal or other transaction that reflects the full and fair value of SemGroup’s current business and future prospects. However, it continues to be the unanimous view of the Board that your current proposal does not provide any reasonable basis from which to begin discussions or negotiations. Reiterating an inadequate value does not make it attractive nor does it provide a reason to engage with Plains.
 
SemGroup’s Board and management team are enthusiastic about SemGroup’s prospects and are confident of achieving stockholder returns in excess of what can be derived from Plains’ unsolicited proposal. We believe that SemGroup is well positioned to continue to grow its business in its key operating areas and believe that our long-term strategic plan will deliver substantial value to our stockholders.
 
As discussed on our third quarter earnings announcement and conference call earlier this week, we have made significant operational improvements and clear progress towards optimizing our corporate structure and asset mix to position our company to participate in growth opportunities in the oil and natural gas production markets. We continued to increase capacity and utilization across our assets, including a 56% increase in White Cliffs Pipeline volumes, an increase in SemCrude Cushing leased storage capacity and a 39% increase in SemGas volumes over the prior year, resulting in increased revenue. In addition, as you recognized, we are evaluating potential projects within the footprint of our existing assets to deploy $350 million to $500 million in 2012-2013 at highly attractive EBITDA multiples that we believe will be beneficial to our stockholders. We are confident that the strong, long-term fundamentals in both crude oil and natural gas will result in more infrastructure needs, and SemGroup is well positioned to participate in this growth.
 
We remain committed to building stockholder value, and we believe that our strategy of growing our business organically in its key operating areas will deliver substantially greater value to SemGroup stockholders than Plains’ proposal.
 
Sincerely,
 

Norman Szydlowski

John F. Chlebowski

Chief Executive Officer

Chairman of the Board

 

Barclays Capital and LCT Capital are serving as SemGroup’s financial advisors and Wachtell, Lipton, Rosen & Katz is serving as legal counsel to SemGroup and its board of directors.

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