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SemGroup Recovery Outpaces Plains All American Offer

NEW YORK ( TheStreet) -- A billion dollar takeover offer for SemGroup (SEMG - Get Report) by Plains All American Pipeline (PAA - Get Report) is off the table, but few investors seem to mind.

Since Plains All American launched a $24 a share bid last fall for the company amid one of the most torrid M&A paces in pipeline sector history, the expectations for SemGroup's businesses and its interests in spun off entities have increased far above the offer price.

In Nov. 2011, Plains All American Pipeline launched a $24 a share bid for SemGroup that quickly fell below the share price of the company as optimism increased about the value of its assets. SemGroup rejected the hostile bid, which valued the company at just over-$1 billion. The company's market cap is $1.25 billion today.

Its 41% stake of Rose Rock Midstream (RRMS) was taken public this past December at $19 a share, raising $140 million. The company also announced a sale of its SemStream business to NGL Energy (NGL) for $279 million in cash in November 2011.

SemGroup's businesses are benefitting from an oil and natural gas boom tied to growing energy production from the Bakken, Niobrara, Granite Wash and Mississippian Lime shale basins.

Since March, specifically, Wall Street analysts have taken Tulsa, Oklah.-based SemGroup's fourth quarter earnings and 2012 guidance as reason to push up price targets.

In a March 1 note, Deutsche Bank analyst Curt Launer raised his SemGroup price target based on increasing forecasted earnings at its crude oil transport operations and rising valuations of its spun off assets, and an equity stake it maintains in NGL Energy.

At the end of March, Launer upgraded Semgroup's price target to $33 on a continued rise in its 60% stake in Rose Rock Midstream.

In a way, SemGroup has come full circle in no longer being an opportunistic takeout candidate for a bigger balance sheet buyer amid its own distress and amid the pipeline M&A craze that peaked in 2011 with Kinder Morgan's $21 billion acquisition of El Paso.

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