De ja vu: another midstream bump candidate (premium)

Monday night, we finally got the long awaited Shell Midstream (SHLX) bump. The final deal terms call for unitholders to receive $15.85/unit plus dividends, a very nice premium to the ~$13.90 price when I first mentioned them back in early March ($13.30 if you adjust for the May dividend and the one we’re about to get in August). In fact, while I think the price is well under the fair value of Shell’s assets, the bump is well above the level I thought Shell would have to go to get the deal over the hump. Kudos the conflict committee and everyone who wrote to the company to express the need for a higher bid (I’ll give myself a pat on the back here as well; I communicated to the board several times the need for a higher bid and I know several of you reached out on the heels of last month’s post / call for action).

The SHLX bump couldn’t come at a better time because I’ve been waiting on resolution there to guide discussion on another situation / MLP bump offer that has a ton of similarities to SHLX. In fact, I think it’s likely that the ultimate bump here is higher; while the assets aren’t the same quality as SHLX, the valuation is much cheaper and the actions that the sponsor has taken to set the company up for the take private are longer term and worse.