Enterprise Products Partners LP will acquire Teppco Partners LP in a sweetened all-stock deal worth about $3.3 billion, forming what the companies say will be the largest U.S. publicly traded energy partnership.
The partnership, announced Monday, will own nearly 48,000 miles (77,000 kilometers) of crude and natural gas pipelines; 200 million barrels of storage capacity for natural gas liquids, crude and refined products; and 27 billion cubic feet of natural gas storage capacity.
It also will control one of the largest liquid natural gas terminals in the nation in the Houston Ship Channel.
Teppco, which had seen its stock value tumble along with the price of oil and natural gas, had rejected a bid for $2.8 billion earlier this year. The new offer represents a 9.3 percent premium to Teppco's closing price Friday.
The combined company will provide some stability in what has become an extraordinarily volatile oil and gas market.
"We're largely a fee-based company," said Rick Rainey, a spokesman for both Enterprise and Teppco. "Whether the price of gasoline is $2 (a gallon) at pump, or $4 a pump we get the same amount of money to ship it."
The deal creates an enormous transportation and storage network and will lead to $20 million in savings, the company said. Enterprise will bring together the oil and gas operations of Texas billionaire Dan Duncan.
The acquisition "will establish Enterprise as the largest pipeline partnership as measured by miles of pipe, enterprise value and equity market capitalization," said Michael A. Creel, President and CEO of Enterprise.
Teppco shareholders will receive 1.24 Enterprise common shares for each Teppco share, a 14.5 percent premium to the initial offer made by Enterprise on March 9.
Teppco Partners LP and its general partner, Texas Eastern Products Pipeline Co. LLC, will become wholly owned subsidiaries of Enterprise. The new partnership will take the Enterprise name.
Teppco said its shareholders should benefit from the combination through a lower cost of capital and improved access to capital markets.
Teppco shares rose 4.5 percent, or $1.30, to $29.99 in early trading. Enterprise shares fell 41 cents, to $24.88.
The deal is expected to close by the end of the year.
AP Business Writer Deborah Jian Lee in New York contributed to this report.