Why Huge Energy MLP Deal Could Put 5 Big Dividend Payers in Play as Buyout Targets

Merger Monday was back, and this week’s biggest deal could be a big game changer. On Sunday, natural gas and natural gas liquids infrastructure company, Oneok Inc. (NYSE: OKE), agreed to pay $18.8 billion, including more than $4 billion in debt, for petroleum pipeline company Magellan Midstream Partners L.P. (NYSE: MMP). Oneok has agreed to pay $67.50 per share for Magellan in cash ($25 a share and 0.667 shares of Oneok) stock for each outstanding common unit of Magellan. The price represents a premium of 22% to Friday’s closing price for Magellan.

Pipeline operators and others in the energy business are going back to the old-school playbook and utilizing mergers and acquisitions as a way to increase growth prospects, and this acquisition gives Oneok, which currently only transports natural gas and its byproducts, a massive network of crude oil and refined products conduits and terminals from north in Minnesota all the way down to Texas. The deal, if it indeed goes through, will make the combined entity, which will have an enterprise value of a stunning $60 billion according to released statements, one of the five largest pipeline operators according to Bloomberg. The question for energy master limited partnership (MLPs) investors is who could be next?

We screened our 24/7 Wall St. MLP research database and found five top companies that could end up in the sights of one of the larger players, such as Enterprise Product Partners. While all five are Buy rated on Wall Street, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Antero Midstream

With shares trading at just under $10 apiece, this well-run company offers a huge total return package, and its water-handling division could make the company attractive. Antero Midstream Corp. (NYSE: AM) owns, operates and develops midstream energy infrastructure. It operates through two segments.

The Gathering and Processing segment includes a network of gathering pipelines and compressor stations that collects and processes production from Antero Resources’ wells in West Virginia and Ohio.

The Water Handling segment delivers fresh water and offers other fluid handling services, such as wastewater transportation, disposal and treatment, as well as high-rate transfer services.

Investors receive an 8.58% distribution. UBS has set its target price at $14. Antero Midstream stock has a consensus target of $12.14. The shares closed on Monday at $10.53.

Cheniere Energy Partners

This company is focused on liquefaction and could be a nice asset for a larger entity to grab now if the parent company would sell. Cheniere Energy Partners L.P. (NYSE: CQP) provides liquefied natural gas (LNG) to integrated energy companies, utilities and energy trading companies worldwide.

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