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Msg  20858 of 27153  at  9/16/2019 2:33:55 PM  by


ET news

Energy Transfer's deal for SemGroup gets thumbs down from investors

Energy Transfer (ET -2.6%) tumbles as much as 4% while most peers move sharply higher after the weekend attack on Saudi Arabian crude processing facilities sent oil prices flying high, as some analysts say ET's offer to buy SemGroup (SEMG +62%) came as a surprise given the company's low stock price and efforts to cut debt.

ET's deal is "a sharp reversal from [the company's] recent messaging on portfolio management, capital discipline and accelerated deleveraging," Tudor Pickering Holt analysts say.

SEMG's crude and products terminal on the Houston Ship Channel likely is the driver behind ET's move, says Wells Fargo's Michael Blum, but "in a market where investors are pushing companies to reduce spending and leverage and increase free cash flow, we're not sure the optics of this deal will be met with enthusiasm."

ET will "face investor scrutiny around the asset mix and the merits of the transaction, though at first glance, it passes our litmus test on accretion," says Citigroup's Timm Schneider, adding that "we wish we could ask some questions, but there is no conference call."

But for SEMG, whose shares surged as much as 65% on the deal news, "This is a nice exit ramp for the company following a strategic review that could have gone in many directions," Wells Fargo's Blum says

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