Shares of ONEOK Inc. (OKE, Financial) declined 6.7% today due to investor concern following the company's announcement to make an acquisition of the rest of EnLink Midstream (ENLC, Financial) for $4.3 billion. Based on this calculation, the
major cause of the stock price decline is due to the offered approximately 37 million new shares will be about 6% of the total shares once the acquisition would be done.
The issues do not end with the dilution as investors are also concerned with how the firm will successfully integrate the acquisition and how will manage the extra debt load normally associated with such a move.
ONEOK Inc., has signed a definitive merger accord in which the company will purchase all the remaining ENLK common units for 4.3 billion ONEOK common stock. The transaction terms include:
- Exchange Ratio:
Each of the outstanding common units of EnLink will be exchanged for 0.1412 share in ONEOK's common stock.
- New Shares Issued:
ONEOK will sell about 37 million shares, or roughly 6% of the total shares outstanding after the offering is
complete.
- Deal Closure:
The transaction is likely to be completed in the first three months of the financial year 2024/25 ending December.
- Previous Acquisition:
This comes after ONEOK bought out GIP's entire stake in EnLink for $3.3 billion in cash announced by the company in September this year.
The threats associated with new shares issuance including dilution effect and the company's capacity to control the higher level of debts as the cause of the investors' mistrust occurring in the decreased value of
ONEOK stock today. As the integration process progresses the company will have to show its ability of handling such a complicated transaction and allaying investor concerns for the stock price to begin to stabilize.
