Targa Resources (NGLS) (TRGP) to Acquire Atlas Pipeline (APL), Atlas Energy (ATLS)

Targa Resources Partners (NYSE: NGLS) and Targa Resources Corp. (NYSE: TRGP) announced they have entered into agreements to acquire Atlas Pipeline Partners, L.P. (NYSE: APL) and Atlas Energy, L.P. (NYSE: ATLS). Targa Resources will acquire ATLS following the spin-off announced today by ATLS of its non-midstream assets. The acquisitions are contingent on one another, and the transactions will close concurrently.

Atlas Pipeline Partners, L.P. Acquisition

Targa Resources Partners will acquire Atlas Pipeline Partners for total consideration of $5.8 billion, including $1.8 billion of debt as of September 30, 2014. Each APL common unitholder will be entitled to receive 0.5846 units of Targa Resources Partners and a one-time cash payment of $1.26 per APL common unit for total consideration of $38.66 per APL common unit, based on the closing price of the Partnership's units on October 10, 2014. The exchange ratio was negotiated as a 15% premium for APL common unitholders based on the volume weighted average prices of APL and TRP units during the 15 trading days ending October 3, 2014. The Partnership will also redeem APL's Class E Preferred Units for an aggregate amount of $126.5 million in cash.

The Partnership expects to finance the cash portion of the transaction with borrowings under its revolving credit facility. In connection with the acquisitions, Targa Resources has agreed to reduce its incentive distribution rights for the four years following closing by fixed amounts of $37.5 million, $25.0 million, $10.0 million and $5.0 million, respectively. These annual amounts will be applied in equal quarterly installments for each successive four quarter period following closing. Based on the Partnership's units outstanding as of September 30, 2014, current TRP unitholders will own approximately 66% of the pro forma combined partnership and current APL common unitholders will own approximately 34%.

Atlas Energy, L.P. Acquisition

Prior to Targa Resources' acquisition of Atlas Energy, ATLS will spin-off its non-midstream assets. After giving effect to the spin-off, ATLS's assets will solely comprise its general partner and incentive distribution rights interests in APL and 5.8 million APL common units. Immediately following the spin-off and subject to the concurrent closing of the Partnership's acquisition of APL, Targa Resources will acquire Atlas Energy for total consideration of $1.869 billion, including 10.35 million TRC shares valued at $1.259 billion based on the closing price of TRC's common stock on October 10, 2014 and $610 million in cash. Targa Resources has arranged committed financing of $1.1 billion to replace its existing revolving credit facility and to fund the cash components of the transaction, including cash merger consideration and $149 million related to change of control payments. Based on shares of TRC and units of ATLS outstanding as of September 30, 2014, current Targa Resources shareholders will own approximately 80% of the pro forma shares outstanding and current ATLS unitholders will own approximately 20%.

Management Commentary

"Both the Targa and Atlas management teams and our boards view this integrated transaction as a highly compelling strategic opportunity to combine two outstanding midstream businesses and create value for all shareholders and unitholders. We believe the combination provides our customers an enhanced midstream service offering, and presents our investors with an enterprise that has increased scale, diversity and growth," said Joe Bob Perkins, Chief Executive Officer of the Company and of the general partner of the Partnership. "The acquisitions will significantly and immediately increase our scale and geographic diversity, accelerating the growth of our premier North American midstream platform. APL's footprint solidifies the Partnership's position as a leader in the Permian Basin, while adding top-tier assets in the Midcontinent and South Texas regions. Importantly, the combination of APL's NGL production with Targa Resources Partners' leading NGL downstream assets will allow the pro forma partnership to generate additional revenue along the NGL value chain, create additional attractive growth capital expenditure projects and accelerate current growth capital expenditure projects. We are excited about this transaction and look forward to welcoming the employees of Atlas to the Targa team."

Strategic Rationale

The combination of Targa Resources Partners and Atlas Pipeline Partners creates a premier midstream franchise with increased scale, geographic diversity and best in class capabilities in key producing basins in the U.S., and creates one of the largest diversified MLPs on an enterprise value basis.

• Attractive positions in active basins – the acquisitions add the Woodford/SCOOP, Mississippi Lime and Eagle Ford and additional Permian assets to the Partnership's existing Permian, Bakken, Barnett, and Louisiana Gulf Coast operations
• Combined position across the Permian Basin enhances service capabilities in one of the most active producing basins in North America, with a combined 1,439 MMcf/d of processing capacity and 10,250 miles of pipelines
• Strong growth outlook with announced organic growth capital expenditures of $1.2 billion for 2014 and over $1.2 billion in 2015
• Growing NGL production from gathering and processing business supports Targa's leading NGL fractionation and export position (Mont Belvieu / Galena Park / Lake Charles)
• Enhances credit profile and results in an estimated 60% pro forma fee-based margin
• Underlying growth in the business drives incrementally higher distribution and dividend growth immediately and over the longer term

2015 Guidance Update – Pro Forma for the Transaction

For the Partnership, management expects to recommend a distribution increase of $0.04 per limited partner unit at the first Board of Directors distribution declaration meeting after the transaction closes; which is expected to be in the first quarter of 2015. Assuming a first quarter close, the Partnership estimates full year 2015 pro forma distribution growth over full year 2014 of 11% – 13%, and expects distribution coverage to be at or above the Partnership's stated target range of 1.1x – 1.2x. In conjunction with the Partnership recommendation, management expects to recommend a dividend increase of $0.10 per share for Targa Resources following the closings of the transactions. Assuming a first quarter close and 11 – 13% distribution growth at the Partnership, the Company estimates full year 2015 pro forma dividend growth over full year 2014 of approximately 35%. The Company's estimated 2015 effective cash tax rate pro forma for the transaction is expected to be 10% - 15% compared to 33% on a standalone basis.

Conditions to Closing

The Boards of Directors of the Partnership, the Company, ATLS and APL have each approved the respective merger agreements. Subject to the completion of the spin-off and customary approvals and conditions, including the expiration or termination of all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act, the acquisitions are expected to close in the first quarter of 2015. The APL acquisition is subject to the approval of the holders of a majority of the limited partner interests in APL. The ATLS acquisition is subject to the approval of the holders of the limited partner interests in ATLS and the holders of the shares of common stock of the Company. The respective boards of APL, ATLS and the Company have voted to recommend the transaction to their unitholders and shareholders.

Advisors

Evercore Partners acted as financial advisor to Targa Resources Partners and the special committee of the Targa Resources Partners' Board of Directors. Richards, Layton & Finger served as legal counsel to the special committee of the Board of Directors of the general partner of Targa Resources Partners. Wells Fargo Securities, LLC acted as financial advisor to Targa Resources Corp. and Vinson & Elkins LLP acted as legal counsel for the Partnership and the Company. BofA Merrill Lynch is providing committed financing to Targa Resources for the transaction.

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