Equitrans Midstream Corporation ETRN recently agreed to acquire all outstanding units of EQGP Holdings, LP EQGP for $20 per unit through a private purchase. The cash deal represents a 17.5% premium on EQGP Holdings' price of $17.02 on Nov 29. The transaction is expected to close on the last day of this year, following which the acquirer will hold more than 95% of EQGP Holdings' units.
Equitrans' shares have seen a decline of 3% while EQGP Holdings' units have rallied 17.6% since the news hit the market. Equitrans plans to implement its Limited Call Right and acquire the remaining units of EQGP Holdings at no less than the same price, after the private purchase is over. The second purchase, expected to be a taxable one for EQGP Holdings' unitholders, will likely close in the first month of 2019. Equitrans had issued a Term Loan B, the cash proceeds of which will be utilized to back the acquisition.
Equitrans also intends to acquire 95 million units of EQM Midstream Partners, LP EQM and a non-economic general partner interest in the same. The company is ready to trade its incentive distribution rights (IDR) and economic GP interest in EQM Midstream in exchange of the units. The transaction is expected to materialize by the January-March period of 2019.
The proposed transactions are expected to streamline and uncomplicate the corporate structure of the company. Following the closing of the transductions, Equitrans is expected to own 61% interest in EQM Midstream, while the rest will be held by the public. EQGP Holdings will not be held publicly. The transactions are expected to pave way for EQM Midstream's 6-8% annual distribution growth. Moreover, Equitrans' annual dividend is expected to increase 8-10% in the long run.
The figure below provides a better understanding of the proposed structure.
Equitrans spun off from EQT Corporation in mid-November. Since its ticker ETRN started trading in NYSE, the stock climbed 6.9% compared with 1.8% collective growth of the industry it belongs to.
Zacks Rank & A Stock to Consider
Currently, Equitrans has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks given below:
Houston, TX-based Enterprise Products Partners L.P. EPD holds a Zacks Rank #1 (Strong Buy). The company's earnings for 2018 are expected to surge more than 36% year over year. You can see the complete list of today's Zacks #1 Rank stocks here .
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Enterprise Products Partners L.P. (EPD): Free Stock Analysis Report EQT Midstream Partners, LP (EQM): Free Stock Analysis Report EQT GP Holdings, LP (EQGP): Free Stock Analysis Report EQUITRANS MIDST (ETRN): Get Free Report To read this article on Zacks.com click here. Zacks Investment Research