Enterprise (EPD) and TEPPCO (TPP) To Merge

June 29, 2009 7:11 AM EDT

Enterprise Products Partners L.P. (NYSE: EPD), TEPPCO Partners, L.P. (NYSE: TPP) and Enterprise GP Holdings L.P. (NYSE: EPE) announced that Enterprise and TEPPCO 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.

The combined partnership will own almost 48,000 miles of pipelines comprised of over 22,000 miles of NGL, refined product and petrochemical pipelines, over 20,000 miles of natural gas pipelines and more than 5,000 miles of crude oil pipelines.

Under the terms of the definitive agreement, TEPPCO and TEPPCO's general partner, Texas Eastern Products Pipeline Company, LLC (referred to as "TEPPCO GP"), will become wholly-owned subsidiaries of Enterprise. In consideration, TEPPCO unitholders, except for a certain affiliate of EPCO, Inc., will receive 1.24 Enterprise common units for each TEPPCO unit, representing: a 14.5 percent premium to the initial offer made by Enterprise on March 9, 2009; an 18.8 percent premium to the exchange rate based on the last 10-day average closing prices of TEPPCO units and Enterprise common units on March 6, 2009, the business day prior to the date on which Enterprise made its initial offer; and a 9.3 percent premium to the closing price of TEPPCO units on June 26, 2009.

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 (referred to as "EPD GP"), to maintain the general partner's two percent interest in Enterprise. EPD GP will continue to be wholly owned by Enterprise GP after the merger.

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