EQGP Holdings (NYSE: EQGP) surged 17.5% by 10:30 a.m. EST on Friday after Equitrans Midstream (ETRN 1.98%) agreed to acquire all the units it didn't already own for $20 apiece in cash. Meanwhile, affiliated master limited partnership EQM Midstream (EQM) slumped as much as 10.3% in early-morning trading after Equitrans made an offer to eliminate the costly management fees it pays to EQGP in exchange for a larger stake in that company.
Equitrans Midstream, which natural gas giant EQT spun off earlier this month, already held a 91.3% interest in EQGP Holdings. However, it signed agreements with several unitholders of EQGP Holdings to buy them out for $20 per unit in cash, which will boost its ownership level in the company to more than 95%. Those deals should close by the end of the year. In the meantime, the company plans to exercise a right under EQGP's operating agreement to acquire the rest of the publicly traded units for $20 apiece. That deal is expected to close early next year.
Equitrans Midstream -- which owns a 12.7% stake in EQM Midstream from the spinoff while controlling a 17.9% interest via EQGP -- also offered to eliminate the costly incentive distribution rights paid by EQM Midstream to EQGP in exchange for an additional 95 million units in that company. That deal would enable EQM Midstream to maintain its current distribution rate while setting the company up to grow its payout at a 6% to 8% annual rate starting next year, which should support 8% to 10% dividend growth for Equitrans. The company hopes to close that deal early next year.
If both of these transactions close, Equitrans Midstream will have simplified its midstream holdings to 61% stake in EQM Midstream. However, some investors likely wanted the company to make things even simpler by also acquiring EQM Midstream, which is the direction many of its peers have taken this year. That move could still come, which is why investors should keep an eye on these high-yielding midstream companies.