Aimed at creating a midstream entity with an enterprise value of $7 billion, natural gas storage and transportation operators Inergy (NYSE:CEQP) and Crestwood Midstream (NYSE:CMLP) today jointly announced a merger agreement that would yield a diverse platform of assets providing a broad range of services across the most important natural gas regions in the country, including the Bakken, Marcellus, and Eagle Ford shale formations.
Because the two companies provide complementary services, they expect the combination will create attractive operational and financial synergies while at the same time enhancing their scale and diversification, making the new company a formidable competitor for major greenfield development and acquisition opportunities.
Under the terms of the complex agreement, Crestwood Midstream and its affiliate, Crestwood Holdings, will take over Inergy and a related master limited partnership, Inergy Midstream (NYSE:NRGM). Crestwood Midstream unitholders will receive 1.070 common units of Inergy Midstream for each unit of Crestwood Midstream they own, a 5% premium to the 20-day price of Crestwood's common units.
Additionally, Crestwood Midstream public unitholders other than Crestwood Holdings will receive a one-time cash payment at closing of the merger of approximately $35 million, or $1.03 per unit, $25 million of which will be payable by Inergy Midstream and approximately $10 million of which will be payable by Crestwood Holdings.
Describing the combination as a merger of equals, Crestwood CEO Robert G. Phillips said: "With this combination, we will truly begin to experience the power of the value chain growth strategy by offering our customers a more comprehensive and competitive suite of services that enables us to capture incremental fee opportunities that expand margins and maximize returns on investment."
Crestwood Midstream is controlled by private equity firm First Reserve, which currently owns all of Crestwood Holdings and owns about 43% of Crestwood Midstream's limited partner units. After the merger, both Inergy and Inergy Midstream will continue to trade on the New York Stock Exchange.
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