NEW YORK (
) -- In a complicated deal, Crestwood Midstream Partners LP of Houston said Monday it plans to merge with Inergy Midstream LP of Kansas City, Mo., to form a mid-sized midstream energy company with an enterprise value of $7 billion.
The combination will have assets in all the major shale sites in North America including the Marcellus, Bakken and Eagle Ford along with the Permian, Powder River Basin Niobrara, Utica, Barnett, Fayetteville, Granite Wash, Haynesville and Monterey locations.
Inergy surged 7.9% to close at $23.75 while Crestwood added 3.6% to end Monday's trading session in New York at $24.70.
The deal is not subject to financing though the companies have a commitment for a revolver/term loan in connection with the transaction with a plan to syndicate and upsize their revolver from $600 million to $1 billion.
The companies said the complementary services they offer create attractive operational and financial synergies and their enhanced scale and diversification will provide further financial flexibility to position the combined partnership to be a "formidable competitor" for major new projects and acquisitions.
The three-step transaction involves a stock payout with Crestwood Midstream unitholders receiving 1.07 units of Inergy Midstream for each unit of Crestwood they own. At Inergy Midstream's closing stock price Friday of $24.55 per share, that part of the deal would be valued at around $1.5 billion, a 5% premium over Crestwood Midstream's 20-day volume weighted average price and 10% over Friday's close. Crestwood Midstream also said unitholders are getting a one-time cash payment totaling $35 million, or $1.03 per unit, $25 million of which Inergy Midstream will pay and $10 million of which Crestwood Holdings will pay. Total consideration to Crestwood Midstream unitholders represents a 14% premium relative to Crestwood Midstream's Friday closing price, Simmons & Co. International wrote in a report Monday.
The deal gives Crestwood Midstream a value of $2.7 billion, a banker with knowledge of the deal said Monday.
Inergy Midstream and Inergy LP will continue to be listed on the New York Stock Exchange under the ticker symbols NRGM and NRGY, respectively. On a conference call with analysts and investors, management said the deal comes with a 3.25% breakup fee. Management said they hope the combination will eventually win investment grade status from the rating agencies. They don't expect any divestitures as a result of the combination, as it doesn't have to clear antitrust regulators.