$3.3B deal creates leading energy partnership

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NEW YORK (Reuters) -- Enterprise Products Partners LP said Monday that Teppco Partners LP had accepted its sweetened $3.3 billion bid in a deal that would form the largest U.S. publicly traded energy partnership.

The deal, which would create a giant in the midstream energy sector, comes as values for the tax-friendly master limited partnerships rebound from a selloff that saw many of them lose more than half their value last year.

Under an exchange of units, Enterprise (EPD) will pay the equivalent of $31.36 per unit of Teppco (TPP), a premium of 9.3% over Friday's closing price.

In April, Teppco had rejected a proposed $2.75 billion takeover offer from Enterprise.

The combined company would hold 48,000 miles of oil and natural gas pipelines; more than 200 million barrels of oil, oil products and natural gas liquids storage; and 27 billion cubic feet of natural gas storage.

The merged company would generate cost savings of at least $20 million and be accretive in 2010, Enterprise Chief Executive Michael A. Creel said in a statement.

Master limited partnerships are a favored structure in the energy industry for many fee-based assets, such as pipelines and storage tanks. The partnerships do not pay corporate taxes and distribute nearly all their profits to their unit holders.

Unit holders of Teppco will receive 1.24 Enterprise common units for each of their units.

Teppco units were up 2.5% at $29.40 in light trading before the market opened, while Enterprise dipped 1.1% to $25.00.

At Friday's close, Teppco's unit price had jumped nearly 47% so far this year to $28.69, but it remained well below its 2008 peak of nearly $39.