DT Midstream, Inc. (NYSE: DTM) has announced its acquisition of three FERC-regulated natural gas transmission pipelines from ONEOK, Inc. (NYSE: OKE) for a total of $1.2 billion. These pipelines have a combined capacity of more than 3.7 billion cubic feet per day (bcf/d) and span approximately 1,300 miles across seven states in the Midwest market region. The acquisition price represents an approximately 10.5x 2025 EBITDA multiple.
Under the terms of the agreement, DT Midstream will acquire 100% operating ownership in Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission. Guardian Pipeline, L.L.C. is an approximately 260-mile interstate pipeline interconnected to DT Midstream's Vector Pipeline, serving key Wisconsin demand centers. Midwestern Gas Transmission is an approximately 400-mile bi-directional interstate pipeline connecting Appalachia supply to the Midwest market region, while Viking Gas Transmission is an approximately 675-mile interstate pipeline connecting utility customers in Minnesota, Wisconsin, and North Dakota to Canadian supply at Emerson, Manitoba.
The acquisition is expected to increase DT Midstream's pipeline segment to approximately 70% of adjusted EBITDA in 2025, with approximately 90% of the acquired portfolio's customer base being demand-pull and around 85% of revenues coming from investment-grade customers.
In terms of financial impact, the transaction is expected to be immediately accretive to distributable cash flow and to improve the company's business profile. The transaction financing includes approximately $900 million in debt and approximately $300 million in common equity. Barclays is serving as the financial advisor and provided committed financing in support of the acquisition, while Weil, Gotshal & Manges LLP is serving as legal counsel to DT Midstream.
The transaction is subject to regulatory approvals, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act, and other customary closing conditions, with the closing expected in late 2024 or early 2025.
DT Midstream's executive team expressed confidence in the strategic rationale behind the acquisition, emphasizing its alignment with the company's strategy of owning natural gas assets connecting premier supply basins with key demand centers, and its potential to increase the backlog of organic growth projects.
In light of these developments, DT Midstream has scheduled a conference call to discuss the transaction, providing investors, the news media, and the public an opportunity to gain further insights into this significant acquisition. Following these announcements, the company's shares moved -1.3%, and are now trading at a price of $101.72. For the full picture, make sure to review DT Midstream's 8-K report.
