Units of PennTex Midstream Partners (NASDAQ: PTXP) jumped on Friday morning, gaining nearly 20% by 10:45 a.m. EDT after parent company Energy Transfer Partners (NYSE: ETP) launched a tender offer to acquire all the outstanding units it did not own.
Energy Transfer Partners is offering $20 per unit in cash to buy the rest of PennTex Midstream Partners. Because Energy Transfer already owns 32.4% of the common units, it only needs 47.6% of PennTex's current unitholders to tender their units. That would give the company control over 80% of the units, which would enable it to trigger a call option to acquire the other 20%.
This transaction is, in a sense, a follow-up to last year's deal to buy a significant stake in PennTex Midstream Partners. At the time the company paid $640 million for PennTex Midstream's general partner, incentive distribution rights, 20 million subordinated units, and 6.3 million of its common units. That transaction effectively handed over control of the company because the combined common and subordinated units represented 65% of the limited partner interest in PennTex. With Friday's offer, Energy Transfer is simply buying out the remaining minority investors to consolidate its holding.
With PennTex Midstream Partners' units spiking close to the $20 mark, there's not much upside left. Because of that, investors might want to consider cashing out now instead of waiting for the tender offer to close later this year. That would eliminate the risk that the deal falls apart and enable investors to put that cash back to work quicker.