Tuesday, refined petroleum products distributor Magellan Midstream Partners, L.P. (MMP) and Magellan Midstream Holdings, L.P. (MGG) announced a definitive agreement to simplify their capital structure by changing the incentive distribution rights and approximate 2% economic interest of Magellan Midstream Partners' general partner into its common units.
As part of the simplification, unitholders of Magellan Midstream Holdings will get 0.6325 Magellan Midstream Partners common units in exchange for each of the holdings' common unit they possess at closing, which represents a 25% premium to the present day's closing price of Magellan Midstream Holdings' common units.
In addition, the simplification will lead to Magellan Midstream Holdings being dissolved and in Magellan Midstream Partners holding its general partner, which will no longer have an economic interest in the company.
The advantages of simplification include the following. Firstly, simplification will result in effectively lowering Magellan Midstream Partners' cost of capital, thereby enabling it to be more competitive for possible future acquisitions and expansion projects. Secondly, as a result of simplification, the company will be able to uphold its strong balance sheet and liquidity by means of 100% equity consideration.
The third advantage will arise from simplification of present organizational structure, which will subsequently make Magellan Midstream Partners more attractive to a wider investor base. The fourth advantage will be the outcome of reduction of administrative costs related to a secondly publicly traded entity.
At present, management expects the simplification to be dilutive to Magellan Midstream Partners' distributable cash flow per unit initially by around 4%, but is anticipated to offer long-term accretion to unitholders. On the basis of the current estimations, management believes that the company will be able to maintain its present quarterly distribution rate of 71 cents per MMP unit in 2009 and potentially increase distributions in 2010.
The conflicts committee of the board of directors of each partnership's general partner collectively approved the terms of the simplification agreement. Each conflicts committee consisted only of independent directors and was formerly delegated authority to negotiate and authorize the terms of the simplification.
The companies expect to complete the simplification in the third quarter of 2009, subject to customary closing conditions including approval of the unitholders of both of them.
On the NYSE, MMP closed Tuesday's regular session at $28.97, down $0.68 or 2.29%, on a volume of 481K shares.
MGG closed Tuesday's regular trade at $14.65, down $0.35 or 2.33%, on a volume of 424 thousand shares. In the after hours, the company's shares rose $1.22 or 8.33% to $15.87.
For comments and feedback contact: editorial@rttnews.com
June 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.