Atlas and Targa: Another Very Complicated Major MLP Acquisition

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Master limited partnership (MLP) Atlas Pipeline Partners L.P. (NYSE: APL) announced Monday morning that it has agreed to be acquired by Targa Resources Partners LP (NYSE: NGLS) in a cash and stock deal worth $7.7 billion, including debt and general partner interests. Unitholders in Atlas will receive 0.5846 shares of Targa stock plus $1.26 in cash for each common unit. That amounts to $38.66 per common unit, a 15% premium to Atlas’s closing price on Friday of $33.62.

But that’s just the beginning. Once Targa Partners completes the deal for Atlas Pipeline, Targa Resources Corp. (NYSE: TRGP) plans to acquire Atlas Energy L.P. (NYSE: ATLS) once Atlas Energy spins-off assets that are not related to Atlas Pipeline. The value of the assets is approximately $1.9 billion. Targa Resources owns a 2% general partner interest, all the outstanding incentive distribution rights and a portion of the outstanding limited partner interests in Targa Partners.

Prior to Targa Resource’s acquisition, Atlas Energy will distribute all its assets not associated with Atlas Pipeline. Atlas Energy unitholders will receive consideration of 10.35 million shares of Targa Resources plus $610 million in cash and a pro-rata share in 100% of Atlas Energy’s distributed non-midstream assets.

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Atlas Energy currently owns 6% of the limited partner units in Atlas Pipeline and 100% of the general partner interest and all the general partner’s incentive distribution rights. It also owns all the general partner Class A units, the incentive distribution rights, and about 28% of the common units of its upstream subsidiary Atlas Resource Partners L.P. (NYSE: ARP).

Common units of Atlas Resource Partners closed at $16.26 on Friday and the company’s market cap is about $1.33 billion. Atlas Energy closed at $32.41 on Friday and carries a market cap of about $1.68 billion. Atlas Pipeline closed at $33.62 on Friday and its market cap is $2.76 billion.

The common units of Atlas Pipeline were trading up about 14% in Monday’s premarket, at $38.25 in a 52-week range of $28.88 to $40.02.

Common units of Atlas Energy traded up about 26%, at $40.86 in a 52-week range of $32.01 to $52.36.

Atlas Resource’s common units were trading at $16.90, up about 4%, in a 52-week range of $14.30 to $23.18.

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