Oneok’s (NYSE:OKE) $18.8B Deal Creates a Massive Oil and Gas Company

Oneok (NYSE:OKE) agrees to snap up Magellan Midstream Partners (NYSE:MMP) in a cash-and-stock deal valued at about $18.8 billion. The acquisition will broaden Oneok’s transportation operation beyond just natural gas to include refined products and crude oil. Importantly, the deal would create one of the largest pipeline operators in the United States.

The purchase price consists of $8.8 billion in equity and $5 billion in assumed debt. Furthermore, the combined company will have a total enterprise value of $60 billion. The transaction is expected to close in the third quarter of 2023.

Oneok expects the deal to be accretive to its earnings from 2024 onward. In addition, it anticipates that over the following four years, free cash flow per share will rise by an average of more than 20%, and that between 2025 and 2027, EPS will rise by between 3 and 7% annually. The business estimates that base synergies should be at least $200 million per year.

This year, the energy sector is projected to see an increase in mergers and acquisitions as firms remain loaded with cash following the 2022 spike in energy prices. This year’s price decrease brought on by recessionary worries is the ideal opportunity for these cash-rich businesses to expand their market share through acquisitions.

Is Oneok a Good Stock to Buy?

Analysts are cautiously optimistic about OKE stock, with a Moderate Buy consensus rating based on six Buys and six Holds. The average price target of $74.75 implies upside potential of 17.3% from the current level.

Investors looking to invest in this stock might want to follow Wells Fargo analyst Michael Blum. Based on TipRanks’ data, he is the most accurate analyst for Oneok stock. Replicating Blum’s position for one year would result in 92% of transactions generating a profit, with an average return of 21.24% per trade.

Disclosure