Dominion Energy Inc.D recently offered a proposal to acquire all outstanding units of Dominion Energy Midstream Partners DM , which are not owned by the company, at 8.2% premium to the 30-day volume-weighted average unit price.
The offer is made to acquire all outstanding common units in exchange for Dominion Energy common shares. Per the offer, each unit will receive 0.2468 Dominion Energy shares, which equates to a per-unit valuation of $17.75.
Reason Behind the Proposal
Dominion Energy Midstream Partners is a partnership formed by Dominion Energy, Inc. to grow a portfolio of natural gas terminaling, processing, storage, transportation and related assets. This proposal is expected to address the negative impact of changes in FERC tax policy on future cash flow of current partnership assets and will control the drop in unit prices.
On Mar 15, the Federal Energy Regulatory Commission ("FERC") revised a policy, which continues to have an adverse impact on the unit prices of Dominion Energy Midstream Partners. FERC revised its 2005 Policy Statement for Recovery of Income Tax Costs so that it no longer allows MLPs to recover an income tax allowance in the cost of service.
Since the Mar 15 revision, units of Dominion Energy Midstream Partners have lost 29.5% till Sep 18, 2018.
When the Deal is Expected to Close?
On Feb 23, 2018, Dominion Energy owned nearly 47.5% limited partner interest in the partnership. The agreement between the parties is expected to be reached in the fourth quarter and the transaction is likely to close in the first quarter of 2019.
The deal, when completed, will be dilutive to Dominion Energy but at the same time, the company will be in full control of a high-quality midstream operator.
In the past six months, shares of the company have gained nearly 4.4% compared with its industry 's growth of 3.1%.
Zacks Rank & Other Picks
Dominion Energy Midstream Partners currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are Northern Oil & Gas Inc. NOG and NextEra Energy Partners LP NEP , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
Northern Oil & Gas delivered an average positive earnings surprise of 138.54% in the trailing four quarters. Earnings estimates of the company have moved up 29.3% to 53 cents in the past 60 days.
NextEra Energy Partners delivered an average positive earnings surprise of 67.53% in the trailing four quarters. Earnings estimates of the partnership have moved up 61.9% to $2.77 cents in the past 60 days.
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