NEW YORK ( TheStreet) - Energy pipeline transporter SemGroup (SEMG) rejected a bid by Plains All American Pipeline (PAA) on Thurday in a continued statement to Plains that it's valuation of the company is all wrong.
SemGroup's Board of Directors rejected an unsolicited October bid of $24 per share in cash for the Tulsa based energy transporter, terminal and storage company founded in 2000. In its statement rejecting the hostile offer, SemGroup pointed to the fact that its stock currently trades at $28.41 a share, nearly 20% higher than Plains's bid. SemGroup's board said in a letter to Plains rejecting the takeover that it, "continues to believe that your current proposal is opportunistic and fails to adequately reflect SemGroup's bright prospects."
It isn't the first time Plains has made a low priced bid for Semgroup and it's just another chink in a multi-year takeover drama.
The now quashed hostile bid was a culmination of almost two years of opposition by Plains to SemGroup's recovery strategy from a 2009 bankruptcy and resulting civil litigation with the Securities and Exchanges Commission. In March 2010, Plains offered to buy SemGroup out of bankruptcy for $17 a share. The offer that was rejected by SemGroup's board and company instead went public in November 2010 and priced at over $24 a share on the first day of trading.This summer, amid a wave of spinoff and IPO plans, SemGroup decided to spin its Rose Rock Midsteam business into a separate publicly traded company and to contribute its SemStream business to NGL Energy (NGL). In August, SemGroup announced it would raise $181 million by doing a public offering for Rose Rock Midstream -- previously the SemCrude oil & gas storage and pipeline division of the company that holds a crude storage facility at the delivery point for West Texas Intermediate in Cushing, Oklahoma. At the end of August, SemGroup then also announced a spin of its SemStream businesses to NGL Energy. Management said that the proceeds of the both transactions would be used to pay down the company's $343 million in debt. Plains's takeover offer in October was rebuff to SemGroup's spin strategy and its overall post-bankruptcy planning. In its letter to SemGroup about the takeover offer, Plains' Chief Executive Greg L. Armstrong said, "We believe that the attractive and certain value we are proposing to deliver to SemGroup's stockholders is greater than any value that might be created on a reasonable timetable from any of SemGroup's other strategic alternatives."
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