Unitholders OK BPL-BGH Merger - Analyst Blog

The proposed merger between Buckeye Partners L.P. (BPL) and Buckeye GP Holdings L.P. (BGH), which was announced in June 2010, received a nod from unitholders of both the partnerships in a special meeting.

In the meeting, a total of 59.3% (about 30.6 million units) of Buckeye Partners' units outstanding and 83.2% (about 23.5 million units) of Buckeye GP common and management units outstanding, eligible to vote, cast their votes for the merger. Of the total votes cast, nearly 96.2% and 98.9% of BPL and BGH unitholders, respectively, voted in favor of the merger.

In addition, 59.3% of Buckeye Partners' units outstanding also cast votes for the approval of Buckeye Partners' Amended and Restated Partnership Agreement, of which 96.1% of the votes were favorable.

The partnerships expect the merger to be completed on November 19, 2010. As per the agreement, every Buckeye GP common and management unit will receive 0.705 Buckeye Partners L.P. units on closing. The holders of Buckeye Partners units will continue to own their existing units.

The trading of Buckeye GP Holdings common units on the New York Stock Exchange will be suspended before the opening of the market on the next business day after the close of the merger. The Buckeye Partners units will continue to be traded on the New York Stock Exchange under the symbol “BPL”.

This merger is an important step for Buckeye towards becoming the best-in-class asset manager. The deal will result in the cancellation of Buckeye GP's incentive distribution rights, thus, increasing distributions to unitholders in the future as the benefits of the merger are realized. It will also help lower Buckeye's cost of equity capital, which will improve the partnership's competitive position on the operating and expansion fronts.

Based in Houston, Texas, Buckeye Partners, L.P. primarily operates refined petroleum products pipeline systems in the United States. Buckeye Partners currently retains a Zacks #3 Rank (short-term Hold rating). The partnership is advantageously positioned versus its closest peer Ferrellgas Partners L.P. (FGP) with a Zacks # 4 Rank (Sell), based on short-term ratings.