© 2015 The Texas Lawbook.
By Natalie Posgate
(May 15) – Leawood, Kansas-based Tallgrass Energy GP, LP has closed its initial public offering. Baker Botts’ announcement of the IPO, which The Texas Lawbook originally covered last Friday, said it was the year’s “largest U.S. IPO” thus far.
Tallgrass, which trades on the New York Stock Exchange as “TEGP,” offered 41.5 million shares at $29 per share and granted the underwriters an option to purchase up to an additional 6.2 million Class A shares. The underwriters exercised the full amount of their option, which closed the IPO on Tuesday at $1.3 billion.
“It is not all that common in any IPO for the company to be in a position to significantly increase the number of shares offered and to price well above the price range on the cover of the prospectus, as TEGP has done,” said Baker Botts corporate partner Mollie Duckworth, who led the firm’s deal team. “The fact that the largest IPO in the U.S. so far this year is coming out of the energy industry, in this challenging commodity price environment, is really remarkable.”
Duckworth added the offering was also unique because it involved a general partner IPO versus that of a “typical MLP,” so TEGP will own interests in the general partner of Tallgrass Energy Partners, LP (TEP), an existing public company.
It was also “relatively unique” among that of other public GPs, she said, because of its “Up-C” structure, which involves the public entity to be taxed as a corporation and sit above an existing limited liability company that continues to have pass-through tax treatment for the pre-IPO owners.
“We had to make sure this complicated structure was implemented and conveyed to potential investors as clearly as possible so that the descriptions of the company’s underlying business could shine through,” Duckworth said.
Duckworth and others at Baker Botts have previously handled several matters for Tallgrass, including the $313 million IPO of its midstream MLP, Tallgrass Energy Partners, LP in May 2013; its acquisition of the Trailblazer Pipeline from Tallgrass Development, LP (TDev) in April 2014; its acquisitions of membership interests in the Pony Express Pipeline from TDev in September 2014 and March 2015; and follow-on public equity offerings for TEP in July 2014 and February 2015, which raised $277 million and $492 million in net proceeds, respectively.
Duckworth, who practices in Baker Botts’ Austin office, received assistance on TEGP’s IPO from Houston partner Josh Davidson, Austin partner Mike Bengston and Austin associates Courtney Fore, Chris Janisch and Robert Montgomery.
The tax team included Houston and Austin partners Mike Bresson and Jon Nelsen and Houston associates Zach Pullin, Michael Telford and Kathryn McEvilly. Austin partner Aileen Hooks and associate Nick Graham advised on environmental matters. The employee benefits team consisted of Houston partner Mark Bodron and associate Stephanie Jeane. Houston senior associate Rachel Lichman took care of finance matters of the deal.
Attorneys from the firm’s New York and Washington, D.C. offices were also involved.
Houston partners David Oelman and Sarah Morgan of Vinson & Elkins advised the IPO’s underwriters, which included Citigroup, Goldman Sachs, BofA Merrill Lynch, Barclays, Credit Suisse, Deutsche Bank Securities, Morgan Stanley, RBC Capital Markets, Wells Fargo, Baird, Scotia Howard Weil, Stifel, Tudor, Pickering Holt & Co. and U.S. Capital Advisors.
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