Crestwood Equity Partners LP has submitted to a shareholder vote a proposal to increase the redemption price of preferred units under a pending merger with Energy Transfer LP.
Midstream gas operator Crestwood signed an agreement on August 16 to be absorbed by Energy Transfer as a subsidiary. In addition to Energy Transfer, the pact was entered into with Energy Transfer’s wholly-owned subsidiary Pachyderm Merger Sub LLC and Energy Transfer’s sole general partner, LE GP LLC, according to a filing with the Securities and Exchange Commission and US Securities (SEC).
Subject to investor vote, the deal provides for 2.07 limited partner interests in Energy Transfer for each Crestwood common unit, which are counted as common shares upon Crestwood’s absorption into Energy Transfer. For preferred shares, holders have the option to convert them into common shares at a conversion ratio of one common share for every 10 preferred shares. Another option for preferred shareholders is to convert their shares into “substantially equivalent units”. A third alternative is to sell these preferred shares for $9.218573 in cash per share to convert them into energy transfer common units using the same exchange ratio, according to the “Agreement and Plan of Merger” filed with the SEC.
The cash put option is now the subject of a consent solicitation opened by Crestwood this week that raises the price per share to $9.857484. Applicable to preferred shareholders from 22 September, the request for consent ends on 17 October. The new price offer is above the September 22 closing price of Crestwood’s preferred units, which was $9.57 per unit.
Eligible voters make up 9.25 percent of Houston, Texas-based Crestwood’s outstanding preferred units, it said in a news release Wednesday.
Under the consent solicitation, Crestwood is also offering to pay a fee of $0.182546 per share to yes voters.
Changing the terms of the merger means changing the agreement that governs Crestwood as a company. “The proposed amendment would permit us to increase the redemption price payable to holders who make a cash redemption election pursuant to Section 5.8(e)(ii)(D) of the Partnership Agreement in connection with the merger of 101 percent of the preferred unit price (or $9.218573 per preferred unit) to 108 percent of the preferred unit price (or $9.857484 per preferred unit),” Crestwood said in a filing at the SEC.
Crestwood said the offer to increase the reimbursement price has been made at the direction of Energy Transfer.
New York-listed Crestwood initially put the value of the total merger transaction at about $7.1 billion, including $3.3 billion in assumed debt, based on its Aug. 15 closing price. [of the transaction]holders of Crestwood common units are expected to own approximately 6.5 percent of the outstanding common units of Energy Transfer,” it said in an Aug. 16 news release.
Crestwood owns gas assets spanning gathering, processing and logistics, most of which are located in the Delaware Basin, Powder River Basin and Williston Basin, according to information on its website.
Energy Transfer, meanwhile, bills itself as “one of America’s largest energy portfolios with assets in 41 states,” with oil and gas transportation and storage operations, according to Energy Transfer’s website.
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