Apollo puts $9 billion into ONEOK to fund $4.425 billion buy

Apollo’s $9 billion nonvoting minority equity investment gives ONEOK a way to buy Brazos Midstream’s Permian Midland Basin assets for $4.425 billion and still cut leverage without issuing common equity, with both companies announcing the deal today. ONEOK said it had executed a definitive agreement for the natural gas gathering and processing assets, while Apollo-managed funds and affiliates are providing the capital.

That funding structure is the key mechanism in the transaction because ONEOK said the Apollo investment will also support the extinguishment of approximately $5 billion of existing indebtedness, immediately reducing expected pro forma 2027 leverage to approximately 3.25 times debt-to-EBITDA.

The structure also looks cheaper than public equity for ONEOK because the investment’s internal rate of return is capped at 7.0% for the first nine years, which the release said is below ONEOK’s cost of publicly traded equity.