ONEOK Announces Agreement to Acquire Remaining Public Stake in ONEOK Partners in a Transaction Valued at $17.2 Billion

ONEOK Will Host a Conference Call Today at 8:30 a.m. ET to Discuss the Transaction and 2017 Financial Guidance

ONEOK expects:

- A dividend increase of 21 percent to 74.5 cents per share, or $2.98 on an annualized basis, with dividend growth of 9 to 11 percent annually thereafter through 2021;

- Annual dividend coverage greater than 1.2 times;

- The transaction to be immediately accretive, and then double-digit accretive to ONEOK's distributable cash flow (DCF) in all years from 2018 through 2021;

- No cash income taxes through at least 2021; and

- ONEOK Partners' unitholders to benefit from lower cost of funding with elimination of incentive distribution rights, improved capital markets access and enhanced dividend growth.

PR Newswire

TULSA, Okla., Feb. 1, 2017

TULSA, Okla., Feb. 1, 2017 /PRNewswire/ -- ONEOK, Inc. (NYSE: OKE) and ONEOK Partners, L.P. (NYSE: OKS) today announced a definitive agreement under which ONEOK will acquire all of the outstanding common units of ONEOK Partners it does not already own for $9.3 billion in ONEOK common stock.

Under the agreement, each outstanding common unit of ONEOK Partners that ONEOK does not already own will be converted into .985 shares of ONEOK common stock, representing a 22.4 percent premium to the ONEOK Partners closing price on Jan. 27, 2017. 

Completion of the transaction is expected to occur in the second quarter of 2017.  As a result of the transaction, ONEOK's annual DCF is expected to approximately double.  Consequently, management intends to recommend to the ONEOK Board of Directors a 21 percent increase in the first quarterly dividend following the completion of the transaction and expects a 9 to 11 percent annual dividend growth rate through 2021. Following the close of the transaction, ONEOK is expected to have a more than $30 billion enterprise value and will continue to operate as a leading diversified midstream service provider with an integrated 37,000-mile network of natural gas liquids and natural gas pipelines, processing plants, fractionators and storage facilities located in the Williston Basin, Mid-Continent, Permian Basin, Midwest and Gulf Coast. Shareholders in ONEOK and unitholders of ONEOK Partners are expected to benefit from the larger size of the combined entity, significantly enhanced financial strength and a lower cost of funding for future growth.

Upon completion of the transaction, ONEOK does not expect to pay cash income taxes through at least 2021.

"This acquisition of the balance of ONEOK Partners underscores the strategic value we place on the business we have successfully built since we ventured into the midstream space nearly 20 years ago," said Terry K. Spencer, president and chief executive officer of ONEOK and ONEOK Partners. "A broad asset footprint, stable cash flows and attractive growth prospects remain core to our long-term growth strategy. Through the acquisition of the 60 percent of the limited partner interests in ONEOK Partners that ONEOK does not already own, ONEOK becomes a standalone operating company with a lower cost of funding and stronger cash flow generation.

"Shareholders of ONEOK are expected to benefit from an increased dividend and higher dividend growth rate," said Spencer. "We also anticipate the transaction will provide ONEOK enhanced access to the broader capital markets to support and fund future growth to meet the needs of our customers.

"The transaction will not impact our employees or their day-to-day responsibilities," continued Spencer. "The merger of our companies will enhance future opportunities for our businesses and employees, allowing us to continue growing as one of North America's largest midstream service providers."  

CREDIT RATINGS

ONEOK has reviewed the proposed transaction with the rating agencies and expects the combined entity to receive investment-grade credit ratings. ONEOK expects significant retained cash flow and earnings growth to continue its progress toward improved credit metrics.

ADDITIONAL TRANSACTION TERMS AND DETAILS

Under the terms of the merger agreement, ONEOK will acquire all of the 171.5 million outstanding units of ONEOK Partners it does not already own at a fixed exchange ratio of .985 ONEOK shares for each public unit of ONEOK Partners. ONEOK Partners units will no longer be publicly traded. In aggregate, ONEOK will issue 168.9 million shares in connection with the proposed transaction, representing approximately 44.5 percent of the total shares outstanding of the pro forma combined entity. Following completion of the transaction, all senior notes of ONEOK and ONEOK Partners will remain outstanding. ONEOK intends to execute cross-guarantees among and between the entities to be effective upon closing of the transaction in order to eliminate the structural subordination. Since ONEOK Partners will be wholly owned by ONEOK, the incentive distribution rights of ONEOK will be effectively terminated.

ONEOK Partners L.P. was represented in negotiations by its general partner's Conflicts Committee, which is comprised of independent members of its general partner's board of directors. The ONEOK Partners Conflicts Committee recommended approval of the transaction to the board of directors of the general partner of ONEOK Partners.

The completion of the merger is subject to the satisfaction of customary conditions, including receipt of requisite approvals of ONEOK shareholders and ONEOK Partners unitholders.

ADVISORS

J.P. Morgan Securities LLC is acting as lead financial advisor; Morgan Stanley & Co. LLC is acting as financial advisor; and Skadden Arps, Slate, Meagher & Flom LLP is acting as legal advisor to ONEOK on the transaction. Barclays is acting as financial advisor and Andrews Kurth Kenyon LLP is acting as legal advisor to the ONEOK Partners Conflicts Committee.    

CONFERENCE CALL AND WEBCAST

In a separate news release issued today, ONEOK provided 2017 financial guidance.

ONEOK and ONEOK Partners will conduct a conference call at 8:30 a.m. Eastern Standard Time (7:30 a.m. Central Daylight Time) on Feb. 1, 2017, to discuss the transaction and 2017 guidance. The call also will be carried live on ONEOK's website.

To participate in the telephone conference call, dial 800-753-0420, pass code 6859965, or log on towww.oneok.com or www.oneokpartners.com.

If you are unable to participate in the conference call or the webcast, the replay will be available on ONEOK's website, www.oneok.com, and ONEOK Partners' website, www.oneokpartners.com, for 30 days.  A recording will be available by phone for seven days.  The playback call may be accessed at 888-203-1112, pass code 6859965.

ONEOK, Inc. (pronounced ONE-OAK) (NYSE: OKE) is the general partner and as of Dec. 31, 2016, owns 41.2 percent of ONEOK Partners, L.P. (NYSE: OKS), one of the largest publicly traded master limited partnerships, which owns one of the nation's premier natural gas liquids (NGL) systems, connecting NGL supply in the Mid-Continent, Permian and Rocky Mountain regions with key market centers and is a leader in the gathering, processing, storage and transportation of natural gas in the U.S. ONEOK is a FORTUNE 500 company and is included in Standard & Poor's (S&P) 500 Stock Index.