Executive summary Magellan managements focus has always been and remains on long-term value creation for its unitholders. Management does not believe that a conversion to a corporation would materially increase Magellans equity…
Background For nearly a decade, Magellan has periodically assessed the potential impacts of converting from a publicly traded partnership to a corporation, from both entity-level and unitholder perspectives, each time concluding that…
Tax consequences of a Magellan conversion Magellan could convert to a corporation in a 351(a) transaction that would generally be non- taxable to unitholders. Only investors with a negative basis (less than 18% of units) would incur…
Impact of conversion on equity price Conversion to a corporation would be expected to attract additional liquidity to Magellans stock. Magellans equity would be eligible for inclusion in index funds that are prohibited from owning…
Impact on price, contd We believe there is insufficient evidence to suggest that a conversion would result in a sustained multiple expansion for Magellans equity. Relevant data points are relatively limited in number, and none are…
Corporate conversion tax impact on unitholders A corporate conversion would have implications for unitholders after-tax returns that are specific to each unitholders basis, investment horizon and tax status. Those implications could…
Conclusion We do not believe a corporate conversion is warranted for Magellan at this time. Not clear that there would be a long-term equity valuation increase. Significant long-term value destruction through the future cash tax…
NYSE: MMP Appendix
Trade group highlights Assuming Magellans valuation did not decrease to reflect the present value of future taxes immediately after a conversion and is calculated as a multiple of current-year cash flows, and further assuming…
Depreciation of pre-conversion tax basis Note: this chart does not reflect depreciation on any post-conversion capital spending. www.magellanlp.com NYSE: MMP 12
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