Enterprise Partners to buy Teppco for $3.3 billion

By Steve James and Joshua Schneyer

NEW YORK (Reuters) - Enterprise Products Partners LP (EPD.N) said on Monday that Teppco Partners LP TPP.N had accepted a sweetened $3.3 billion takeover bid in a deal that will form the largest publicly-traded U.S. pipeline network.

The transaction, which requires the approval of Teppco unit-holders as well as regulatory clearance, is expected to close sometime in the fourth quarter, Enterprise said.

The announcement of the deal, which will form a 48,000-mile network of pipelines transporting crude, refined products and natural gas, sent Teppco units up 5 percent to close at $30.12 on the New York Stock Exchange. Enterprise Products slipped 1.3 percent to $24.96.

Both companies are master limited partnerships run by general partners owned by the same entity, Enterprise GP Holdings LP (EPE.N). Enterprise Products is controlled by Dan Duncan, Houston's richest man, and a partnership controlled by Duncan bought a significant stake in Teppco in 2005.

Analysts said the merger is a step toward Duncan consolidating control over existing North American oil and gas pipeline networks.

"This reflects the growing importance of the oil and gas transportation industry," said Antoine Halff, vice president of research for the Newedge Group. "Oil and gas transport are increasingly linked to each other.

"Not just because some consumers are switching from oil to gas, but also because the oil industry itself has become a very large natural gas and natural gas liquids consumer."

Under an exchange of units, Enterprise will pay the equivalent of $31.36 per unit of Teppco, a premium of 9.3 percent over Friday's closing price. In April, Teppco had rejected a proposed $2.75 billion takeover offer from Enterprise.