Enterprise Products Partners LP, TEPPCO Partners LP, and Enterprise GP Holdings LP have entered into definitive agreements to merge Enterprise and TEPPCO (along with TEPPCO’s general partner) to form the largest publicly-traded energy partnership with an enterprise value of more than $26 billion.
The combined partnership, which will retain the name Enterprise Products Partners L.P., will access the largest producing basins of natural gas, natural gas liquids (NGLs) and crude oil in the U.S., and serve some of the largest consuming regions for natural gas, NGLs, refined products, crude oil and petrochemicals. 
"We are excited to announce this merger, which will establish Enterprise as the largest pipeline partnership as measured by miles of pipe, enterprise value and equity market capitalization," said Michael A. Creel, president and CEO of Enterprise. "This transaction expands Enterprise’s lines of business beyond its strong operating presence in providing services to producers and consumers of natural gas and NGLs into the transportation and storage of refined products and crude oil."
Under the terms of the agreement, TEPPCO and TEPPCO's general partner, Texas Eastern Products Pipeline Co. LLC, will become wholly-owned subsidiaries of Enterprise. TEPPCO unitholders, except for a certain affiliate of EPCO Inc., will receive 1.24 Enterprise common units for each TEPPCO unit.
An affiliate of EPCO Inc., a private company controlled by Dan L. Duncan, will exchange its 11,486,711 TEPPCO units for 14,243,521 Enterprise units, based on the 1.24 exchange rate, which will consist of 9,723,090 Enterprise common units and 4,520,431 Enterprise Class B units. The Enterprise Class B units will not be entitled to regular quarterly cash distributions for the sixteen quarters following the closing of the merger. The Class B units will convert automatically into the same number of common units on the date immediately following the payment date of the sixteenth distribution following the closing of the merger. The total distributions forgone by the Class B units would be more than $40 million based on expected increases in the cash distribution rate for Enterprise’s common units during this period. The Class B units will be entitled to vote together with the common units as a single class on partnership matters.
In exchange for the merger of TEPPCO GP with a subsidiary of Enterprise, Enterprise GP will receive 1,331,681 Enterprise common units and an increase in the capital account of Enterprise’s general partner, Enterprise Products GP LLC (EPD GP), to maintain the general partner’s 2% interest in Enterprise. EPD GP will continue to be wholly-owned by Enterprise GP after the merger.
Following closing, Enterprise expects affiliates of EPCO Inc., including Enterprise GP, will own roughly 29.5% of Enterprise’s outstanding limited partner units and that Enterprise GP will own approximately 3.4% of Enterprise’s outstanding limited partner units.
The executive management team of the general partner of Enterprise after the merger closes will continue to include Dan L. Duncan, chairman; Michael A. Creel, president and CEO; A. J. Teague, executive vice president and chief commercial officer; Richard H. Bachmann, executive vice president and chief legal officer; William Ordemann, executive vice president and chief operating officer; and W. Randall Fowler, executive vice president and CFO.
Completion of the merger is expected to occur during the fourth quarter of 2009.
Financial advisors for this transaction were Barclays Capital Inc. for Enterprise; Lazard Frères & Co. LLC for the Audit, Conflicts and Governance Committee of the general partner of Enterprise; Credit Suisse Securities (USA) LLC for the independent Special Committee of the Audit, Conflicts and Governance Committee of the general partner of TEPPCO; and Morgan Stanley & Co. Inc. for the Audit, Conflicts and Governance Committee of the general partner of Enterprise GP. Legal counsels were Andrews Kurth LLP for Enterprise; Skadden, Arps, Slate, Meagher and Flom LLP for the Audit, Conflicts and Governance Committee of the general partner of Enterprise; Baker Botts L.L.P. for TEPPCO; Mayer Brown LLP for the independent Special Committee of the Audit, Conflicts and Governance Committee of the general partner of TEPPCO; and Baker & Hostetler LLP for the Audit, Conflicts and Governance Committee of the general partner of Enterprise GP.
