Tallgrass Energy Accepts Sweetened Buyout Deal from Blackstone

HOUSTON (Reuters) - U.S. pipeline operator Tallgrass Energy said on Tuesday it accepted a sweetened offer from a Blackstone-led group that values the company at about $6.3 billion.

The new offer came after Tallgrass shareholders had called for private-equity firm Blackstone to increase its original $19.50 a share offer amid complaints the original deal gave Tallgrass executives a price for their shares higher than other holders.

Tallgrass shares rose 21% to $22.15 in early trading.

The original take-private offer triggered a dispute with investors over a provision that gave Tallgrass executives a premium of about 30% for their shares. That dispute led former CEO David Dehaemers to criticize institutional shareholders for driving down the value of the company.

Blackstone's offer of $22.45 per Class A share represented a premium of 22.7% to the company's Monday close, and was sweetened from its August $19.50-a-share take-private offer.

"We expect common holders will still receive 17% less than a block of insider stock, which will trade at $26.25 per share based on a side letter agreement," said Ethan Bellamy, an analyst at Robert W. Baird & Co, in a note to clients. He earlier had described the executives' favored treatment as "bad governance."

Criticism of the controversial side letter agreement may have helped boost the price of the latest bid, he said.

"Call it a win for shareholder rights," added Simon Lack, a managing partner at SL Advisors, an asset manager that focuses on energy pipeline and storage businesses.

The deal brings together Blackstone Infrastructure Partners, affiliates of Spain's Enagas SA, GIC, NPS and USS, a group that already owns nearly 44% of Tallgrass's Class A and Class B shares.

Tallgrass had set up a Conflicts Committee on its board to evaluate the original offer. The committee has unanimously approved the sweetened offer, Tallgrass said on Tuesday.

Blackstone Infrastructure will fund the transaction with about $3 billion in equity and the remainder with debt, Tallgrass said.

In a separate statement, Spanish firm Enagas said it has agreed to invest $836 million in the U.S. natural gas and crude pipeline operator as part of a takeover involving other investors.

Citigroup Global Markets Inc and Credit Suisse Securities are the financial advisers to Blackstone Infrastructure Partners, while Evercore Group acted as the financial adviser to Tallgrass.

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