$19 billion vote: ONEOK's Magellan buyout would make history, keep 'local legacy' thriving - Tulsa World

ONEOK's Magellan buyout to make history, keep 'local legacy'

A vote next month among thousands of people won’t have anything to do with choosing public leaders, state questions or bond issues.

But it will have an impact to the tune of many billions of dollars and thousands of employees involving two Tulsa-based companies.

In what is believed to be the largest private transaction in state history, investors will vote on ONEOK’s proposed $18.8 billion buyout of Magellan Midstream Partners.

Investors of ONEOK and Magellan will decide in separate virtual meetings an hour apart on Sept. 21 on the proposed buyout, which already has been approved by the boards of directors of both companies.

“Investors will be voting now all the way through Sept. 21,” said Aaron Milford, Magellan’s president and CEO.

“Some investors will vote early; a lot of investors will wait until the very last minute to vote.

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“It is exciting ... when I think about the strength of this combined company after this combination, it’s really exciting. Obviously the day (Sept. 21) is exciting in some respects because that’s the next milestone we need to cross in order to make that stronger company happen,” he said.

“We think we’re going to do that. We’re confident we’re going to get that vote. ...

“You start looking at what this combined company can accomplish — its size, its scale — the fact that it’s right here in Tulsa ... it’s good for the city and it’s good for the state. That is exciting.”

The combined company would have a total value of $60 billion, will benefit investors from a tax perspective, and through its diversification provide “significant potential for enhanced customer product offerings and increased international export opportunities,” ONEOK said.

ONEOK is a leading midstream energy services provider with an approximately 40,000-mile network of natural gas liquids and natural gas pipelines.

Magellan primarily transports, stores and distributes refined petroleum products and crude oil.

It owns the longest refined petroleum products pipeline system in the country, with access to nearly 50% of the nation’s refining capacity, and can store more than 100 million barrels of petroleum products such as gasoline, diesel fuel and crude oil.

The combined company will own thousands of miles of liquids-oriented pipelines, with significant assets and operational expertise at the Gulf Coast and Midcontinent market hubs, ONEOK said.

A simple majority of ONEOK shareholders who vote is needed to approve the buyout. But a simple majority of all Magellan unitholders is required for approval, meaning any Magellan unitholder who does not vote essentially will be considered an “against” vote.

That means Milford — who has been with Magellan since 2004, earned bachelor’s and master’s degrees from the University of Tulsa and grew up in Owasso — has a selling job to do.

Last week, he held an interview with the Tulsa World to discuss the buyout, along with at least one local TV station, and planned to be in New York for other media interviews and talks with investors.

In addition, Magellan publicly launched a new website recently for investors to “Vote ‘FOR’ the ONEOK-Magellan Merger Today” at maximizingvalueformmpunitholders.com.

Magellan also has been contacting investors by email, phone calls, an internal website and physical letters informing them of what the buyout means and to vote for it.

While expressing confidence that investors will approve the transaction, Milford said, “We’re not crossing any of those bridges, to be honest with you,” in case the transaction is not approved.

“This is a really good deal,” he said. “We think the merits speak for themselves. We need to communicate that really, really well, and we think if we do that we’re going to be successful.

“And if for some reason we’re wrong, we’re still going to have a really good company.”

If investors don’t approve, he said, “We’ll cross that bridge when we get there, if we get there. We don’t expect to get there.”

As of February, Magellan had 203,293,822 common units outstanding that were owned by about 170,000 record and beneficial owners, the company said.

ONEOK has more than 1,700 institutional owners (other companies) and shareholders that have filed forms with the Securities and Exchange Commission, with at least 335,691,600 shares.

Magellan has about 1,700 employees (roughly 800 in Tulsa); ONEOK has about 2,840 employees.

Milford said last week there could be some effect on the number of employees, but that “I expect it to minimal.”

Tulsa Regional Chamber President and CEO Mike Neal noted the companies’ lengthy histories in Tulsa — ONEOK dating back more than a century and Magellan about two decades.

“This kind of local legacy, which will continue under this acquisition, is something the Tulsa Regional Chamber holds dear,” Neal said in a prepared statement when the transaction was announced on Mother’s Day. “Both energy infrastructure businesses value community involvement, and we are grateful this combined company will stay in our city.”

If the buyout is approved, Pierce H. Norton II, ONEOK president and chief executive officer, will continue to serve as CEO of the combined company. ONEOK intends to seek and nominate one or two director(s) serving on the board of Magellan’s general partner.

Magellan would be a wholly owned subsidiary of ONEOK, meaning there would not be a name change with the combined companies, a ONEOK spokesman said last week.

Milford said his role in the combined company has not yet been determined.

Another aspect of the transaction — where the combined company’s offices would be physically located — also has yet to be determined.

Currently, Magellan’s offices are located on several floors in the 52-story BOK Tower downtown; ONEOK is located in its 17-story building at 100 W. Fifth St., about six blocks southwest.

A spokeswoman at the Oklahoma Department of Commerce said researchers at the agency believe the buyout is the largest private transaction in state history — slightly more than the $18.355 billion purchase of Kerr-McGee by Anadarko Petroleum in 2006.

However, that transaction would be valued at more than $27.53 billion in today’s dollars.

The results of the Magellan vote will be disclosed after its meeting, the company said. It was not immediately clear when the results of the ONEOK vote would be available, but Milford indicated it would be very soon after the vote is final.

“It’s big deal,” Milford said. “And it’s a big deal in the midstream energy space. Both ONEOK and Magellan, independently, are significant players in that space. So we’re coming together to make an even stronger company that will have an even bigger presence within the energy infrastructure space.”

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