Investing
It Is Merger Monday Again, Plus a Baker's Dozen +1 Fed Speeches This Week
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Premarket action on Monday had the three major U.S. indexes trading higher. The Dow Jones industrials were up 0.37%, the S&P 500 up 0.36% and the Nasdaq 0.26% higher.
It has been a while since we have started a week with a big-time merger. A year ago this month, Broadcom agreed to pay $61 billion for VMware, and last December, Amgen announced a deal valued at $26 billion for Horizon Therapeutics. Neither deal has been completed yet.
On Sunday, natural gas and natural gas liquids infrastructure company Oneok Inc. (NYSE: OKE) agreed to pay $18.8 billion, including more than $4 billion in debt, for petroleum pipeline company Magellan Midstream Partners LP (NYSE: MMP). Oneok has agreed to pay $67.50 per share for Magellan in cash ($25 a share and 0.667 shares of Oneok) stock for each outstanding common unit of Magellan. The price represents a premium of 22% to Friday’s closing price for Magellan.
As of Friday’s closing bell, Oneok’s market cap was about $28.5 billion, and Magellan’s was $11.2 billion. Oneok unitholders are receiving a dividend yield of 7.56, and Oneok’s are being paid a yield of 5.99%.
Magellan will be merged into a new wholly owned subsidiary of Oneok when the deal closes, now expected to happen in the third quarter of this year. The step-up transaction is a taxable event for Magellan unitholders, and Oneok will experience a leap in its tax basis roughly equal to the total price, including debt, for Magellan. The new company expects to benefit from the step-up deal by deferring the expected impact of the new corporate alternative minimum tax from 2024 to 2027. The total tax benefit has been valued at around $3 billion with a net present value of about half that.
The combined market cap vaults Oneok into the ranks of the 10 largest U.S. energy infrastructure firms, roughly on par with Kinder Morgan and TC Energy.
At practically the same time on Sunday, Denver-based gold mining giant Newmont Corp. (NYSE: NEM) announced that it had reached a deal to acquire Australian miner Newcrest Mining in an all-stock deal valued at around $17.5 billion. In addition to the 0.4 shares of Newmont stock Newcrest shareholders will receive for each Newcrest share, Newcrest also will fund and pay a special dividend of $1.10 to its shareholders. The deal represents a premium of around 46% to the price of Newcrest stock when this saga began last year.
In addition to its gold reserves, Newcrest brings nearly 50 billion pounds of copper reserves and total resources to the deal. Before the deal, Newmont was the world’s largest gold producer. The combined company will have 148 million ounces of gold reserves and 179 million ounces of gold resources once the deal is completed.
Newmont founded Newcrest in the 1960s and spun off the Australian operations when Newmont merged with BHP Gold Mines in 1990. In 2019, Newmont acquired Goldcorp in another all-stock deal valued at $10 billion.
And now, stay tuned for something completely different. Starting Monday, 14 Federal Reserve governors and presidents will deliver speeches this week. Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari, Richmond Fed President Tom Barkin and Fed Governor Lisa Cook are all giving speeches on Monday.
Tuesday brings more speeches: Cleveland Fed President Loretta Mester, Fed Governor Michael Barr, Dallas Fed President Lorie Logan and Bostic again.
Wednesday gives everyone a breather, but Thursday continues the wave with Fed Governor Philip Jefferson joining Barr and Logan behind a podium.
The week ends with New York Fed President John Williams, Fed Governor Michelle Bowman and Fed Chair Jerome Powell all giving speeches on Friday.
Here is a look at how the markets fared on Friday.
Six of 11 market sectors closed higher on Friday. Utilities (0.44%) and consumer staples (0.36%) had the day’s largest gains. Consumer cyclicals (−0.89%) and financials (−0.41%) posted the day’s worst losses. The Dow closed down 0.03%, the S&P 500 down 0.16% and the Nasdaq down 0.35% on Friday.
Two-year Treasuries added nine basis points to end Friday at 3.98%, and 10-year notes also rose by seven basis points to close at 3.46%. In Monday’s premarket, two-year notes were trading at around 4.01% and 10-year notes at about 3.49%.
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