ONEOK secures $9B Apollo investment to fund $4.425B Brazos Midland acquisition and cut $5B debt

ONEOK entered into a Contribution Agreement under which Holdings will contribute $9 billion of cash to ONEOK, L.L.C. in exchange for Class A Units. The transaction is subject to customary closing conditions and is expected to close on or after September 10, 2026.

The proceeds from the contribution are intended to fund the Acquisition and to extinguish approximately $5 billion of ONEOK's outstanding indebtedness. This debt reduction is a material use of the $9 billion cash contribution.

During the Initial Period, the Class B Member receives 15% of ONEOK's consolidated cash flow from operations for any quarter a distribution is made, with the Class A Member able to elect up to 20%. After the Initial Period, the Class B Member receives a fixed $3.25 million per quarter, increasing to $6.5 million after the 15th anniversary.

The Class A Member has a buyout right to purchase all Class B Units at the Buyout Amount, with the price increasing to 115% of the Buyout Amount between the 15th and 20th anniversaries. The Class B Member also has an equity conversion right from the 20th anniversary to convert units into ONEOK common equity at a discount to the Sale Right Amount.

The company is issuing Class A Units to ONEOK and Class B Units to an Investor in a private placement exempt from registration under Section 4(a)(2) of the Securities Act. This is a non-public offering, so the securities are restricted and not freely tradable. The filing does not disclose the number of units or the consideration received.

ONEOK is restructuring into a holding company structure. Each existing share of ONEOK common stock will automatically convert into an equivalent share of the new top holding company, which will be renamed ONEOK, Inc. and continue trading on the NYSE under the symbol OKE. The reorganization requires no stockholder vote and is intended to facilitate the broader transaction.

ONEOK has launched cash tender offers for 20 series of its outstanding debt securities. The tender offers are part of a previously announced plan to repurchase or repay $5 billion of senior debt. The filing does not disclose the specific terms, pricing, or acceptance amounts for the tender offers.

ONEOK's wholly owned subsidiary, ONEOK Rockies Midstream, L.L.C., has agreed to acquire 100% of the membership interests of Brazos Midland, LLC from Brazos Midstream Holdings III, LLC for a base purchase price of $4.425 billion in cash. The purchase price is subject to customary closing and post-closing adjustments. The acquisition is subject to customary conditions, including HSR antitrust clearance.

ONEOK has signed a definitive agreement to acquire Brazos Midstream's Permian Midland Basin natural gas gathering and processing assets for $4.425 billion in cash. The acquisition is expected to close in the fourth quarter of 2026, subject to customary closing conditions including Hart-Scott-Rodino Act clearance.

The acquisition will be funded by a $9 billion nonvoting minority equity investment from Apollo-managed funds. The investment carries a capped internal rate of return of 7.0% for the first nine years, with value creation above the cap accruing to ONEOK common shareholders.

ONEOK plans to use $5 billion of the Apollo investment proceeds to extinguish existing debt, including repaying its $1.2 billion term loan and exercising make-whole calls on certain senior notes. This is expected to reduce pro forma 2027 leverage to approximately 3.25 times debt-to-EBITDA.

The acquisition is valued at approximately 7.5 times estimated 2027 EBITDA including $80 million of full-year synergies, and approximately 6.0 times estimated 2028 EBITDA. ONEOK expects the transaction to be immediately accretive to earnings and free cash flow per share.

The acquisition more than doubles ONEOK's Midland Basin processing capacity to approximately 2.3 Bcf/d. The Brazos Midland system will include approximately 700 miles of gathering infrastructure and 1.2 Bcf/d of processing capacity across seven core Permian Midland Basin counties following completion of the Cassidy II plant expected in Q3 2027.

The tender offers are part of a larger $5 billion debt repayment plan. This signals a significant deleveraging effort by the company.

The tender offers are contingent on the completion of a minority equity investment by Apollo Global Management and related reorganization transactions. If those transactions do not close, the tender offers will not proceed.

The tender offers are tied to a corporate reorganization in which ONEOK will merge into a new subsidiary and the corporate structure will change. After the reorganization, the successor entity will be renamed ONEOK, L.L.C. and the parent will be renamed ONEOK, Inc.

In addition to the tender offers, ONEOK plans to redeem all of its 5.550% Senior Notes due 2026 and about $250 million of its 4.250% Senior Notes due 2027. This further reduces outstanding debt.