EIP Responds to Magellan Management's Scare Tactics; Merge with ONEOK or Else

WESTPORT, Conn., Sept. 5, 2023 /PRNewswire/ -- Energy Income Partners, LLC (EIP) the fourth largest and long-time shareholder in Magellan Midstream Partners, L.P. ("Magellan") believes that Magellan's August 29, 2023 Presentation amounts to a series of scare tactics that present Magellan unitholders with a false choice: merge with ONEOK or else. EIP's decision to vote against the merger is based on the financials presented by management that show definitively that Magellan is better off as a stand-alone company, and we urge our fellow unitholders to vote "no".

EIP has released a new presentation on its website votemmp.com that addresses Magellan's August 29, 2023 presentation which further outlines the points below.  

EIP calls out Magellan Board and Management for doubling down on Magellan's poor prospects as a standalone company formed as a partnership due to anticipated weakness in petroleum demand.  Management's assertion that its poor prospects justify this merger belies their assertions in their own 10-K released February of 2023 and their Investor Day presentation on April 2022. EIP observes that Magellan was making a public disclosure of its positive prospects AT THE SAME TIME that it was negotiating a deal that it now says is intended to stave off these dangers.   

EIP shows in its presentation that Magellan has tripled its earnings over the last 15 years during which time refined petroleum demand has declined nearly 7%, disproving current management's entire thesis regarding the impact declining petroleum demand may have on per share earnings growth.

EIP calls out Magellan on warning unitholders that the price for units and the multiples at which they trade could decline, while ignoring the tax savings that would result if the transaction were rejected.

EIP calls out Magellan for failing to conduct a fulsome sales process. If this transaction is so important to avoid the secular risks that Magellan warns about, why did Magellan only speak to one counterparty and why didn't it conduct a broad process, and determine what other alternatives were available? A passive check following the announcement of a transaction is hardly the way to maximize value if a sale is warranted. The current narrative that the ONEOK transaction is the solution to the secular risks facing Magellan has all the appearance of an after-the-fact rationalization rather than a well-considered motivation. 

EIP calls out Magellan's Board for failing to engage with unitholders including EIP to discuss alternatives including conversion to a C-Corporation or to provide analysis other than a naked conclusion that such a transaction would be "complex" or "uneconomic."

EIP calls out Magellan for mischaracterizing or misunderstanding EIP's tax analysis. Their Presentation contests the truism that investors benefit from the deferral of taxes because of the time value of money. EIP has never disputed the existence of an existing tax liability only that its present value is far less than the $2.7 billion that would be due upon completion of this merger.

EIP calls out Management for not disputing the poor growth prospects for ONEOK evidenced by ONEOK's own forecast in the S-4 of less than a 5% return on its growth capital over the next five years.

EIP has a greater belief in Magellan's prospects than both Magellan's Board and Management. Based on financial analysis of the information provided by ONEOK and Magellan management, it is clear that staying a stand-alone company with an appropriate analysis of alternatives such as a tax-efficient conversion to a C-Corp is better for unitholders than the proposed merger. Magellan's own 10-K, from February of 2023, highlighted its opportunity as a standalone company to deploy capital to improve the value of its common units.  Magellan is a top-tier company with excellent assets that generate stable fee-based inflation hedged income that has consistently over time supported steady growing earnings.

About Energy Income Partners, LLC

Founded in 2003, Energy Income Partners (EIP), LLC is an asset manager based in Westport, CT focusing on energy infrastructure. EIP's team has significant experience in the energy, pipeline and utility industries. As of July 31, 2023 EIP has $5.2 billion in assets under management. www.eipinvestments.com

Disclosures:

This is not a solicitation of authority to vote your proxy. Please DO NOT send us your proxy card. Energy Income Partners, LLC is not able to vote your proxies, nor does this communication contemplate such an event. EIP urges shareholders to vote against the proposed merger or not vote which will have the same effect as voting no.

The views expressed are those of Energy Income Partners, LLC as of the date referenced and are subject to change at any time based on market or other conditions. These views are not intended to be a forecast of future events or a guarantee of future results. These views may not be relied upon as investment advice. The information provided in this material should not be considered a recommendation to buy or sell any of the securities mentioned. It should not be assumed that investments in such securities have been or will be profitable. This piece is for informational purposes and should not be construed as a research report.

Energy Income Partners, LLC conducted its own analysis based upon information available to it at the time of the analysis which may change at any time without notice and does not make any warranty as to the accuracy or completeness of any analysis, data point, assumption or opinion presented herein.

Distribution of this letter, regardless of the means or format of its delivery, does not constitute the provision of tax advice by EIP, nor should any general analysis piece be relied upon for the formulation of any targeted tax strategy. For more information regarding specific personal or corporate tax matters, including, but not limited to, personal tax implications relating to specific portfolio transactions, please consult a qualified tax professional.

SOURCE Energy Income Partners, LLC