My name is Jeremy Tonet, I cover the midstream and utilities universe for JP Morgan Equity Research. For our final presentation of the day, we are extremely excited to be joined by Magellan CEO, Aaron Milford. Very exciting developments with the Magellan story. Thank you very much for taking the time to join us today, maybe I'll just lead off with the question on everyone's mind. Starting off, if you could just discuss the factors that went into Magellan's decision to sell to ONEOK. How long had there been conversations between the two companies, did Magellan hold a full process? How did potential C corporate conversion factor in? A lot of elements to this decision, if you could walk us through. Well, Jeremy, thanks. First of all, thanks for having us this afternoon. It's been a great conference. It's great to talk with you all. Starting with the first part of your question about, you know, why would Magellan think about selling the company or combining with ONEOK in this instance? For us, it actually goes back strategically for some period of time. You know, we would often get asked the question: Would Magellan think about diversifying into other products or other parts of the energy industry? Our answer was, sure, we're open-minded to anything that creates value, and the idea of having a more diversified company with, you know, more product exposure to things like NGLs and natural gas, in particular, is something that we'd be interested in doing if we could find a way to do, and this is the important part, that creates value. Through the years, we've spent time studying that. You know, what options are available to us to find a way to enter the NGL business or natural gas business, and other commodities, frankly, to add to our already strong refined products and crude business. How do we go about doing that? There's just a lot of background work that we've been doing for the years, searching for a way to do that. One of the things that happened is, you'll recall in the... or see in the preliminary S-4 and proxy statement we filed yesterday morning, our first conversation with ONEOK was in 2019. That conversation essentially comes from the work that we do, making sure we're evaluating strategic alternatives. The other part of that conversation, Jeremy, that we always mentioned, was that whatever we were gonna do in the NGL and natural gas space was most likely gonna be inorganic or an acquisition. The reason we were of that opinion was that, you know, historically, as a company, we've built things. If you go all the way back to really 2004 or 2009, we've been a company that has grown organically. The crude oil business is an example, where we sort of built the assets and built that business for us. We have a natural inclination to want to build things because we think there's value in it. We knew in the NGL space, just you need the full value chain in order to be successful in that, and that would probably lead us to an acquisition. What you don't know, even though you've come to that conclusion, is which side of that coin might you be on, and a lot of that has to do with just what's happening in the market and what the opportunities are available. The idea of combining with ONEOK is not a new idea. The idea of wanting to have a diversified portfolio is not a new idea. It just so happens that everything came together in this particular instance with ONEOK, to combine and create the stronger, higher growth, more resilient company that we sort of had in mind. I think that also speaks to just our mentality, which is we're all about creating value for our unitholders. That's what we're supposed to do. You can't get too hung up on which side of an equation you're on, so long as when you look at that equation, it's accomplishing your strategic objective, and you believe that it's maximizing value for your unitholders. If that's... If you end up on one side of that coin or the other, well, that's the goal, that's what you're supposed to do, and that's what we're doing. That is our objective. That's the why were we thinking about, you know, selling. We weren't necessarily thinking about selling. We were wanting to create a much more diversified company. That's what this transaction does. It's just really an extension of a strategy we've already been employing. Got it. That, that's very helpful. I know I had multiple questions packed in there, so I didn't know if there's any other thoughts you were able to share at this point, in this juncture, as far as conversations broadly with other companies. you know, Magellan talked about C corp analysis in the past, and I guess how those factored into this process. I just didn't keep up with all the questions, thank you for that. In terms of, you know, what did the process look like? As you'll see in the preliminary proxy statement, it was a heavily negotiated process. You know, with ONEOK. What's important to understand is what I sort of led with, which was we've done a lot of background work. We pay constant attention to the strategic alternatives that are available to us, things that we think are actionable, things that could create value, whether those are acquisitions or different combinations or joint ventures or selling assets or buying assets. It's a continual process for us at all times. That creates a good background for us, where we're current at all times about what our options might be, so that when you do get an opportunity that comes in, you're not starting from zero. You sort of understand the playing field and the background, and that was the case here. We had that background work. We understand what's sort of possible for us, and then we, you know, start our discussions with ONEOK at the end of 2022. Through the process, as you're evaluating, before you actually, you know, agree to do something like this, you think about, well, who else might be interested in doing this? We did that work. We talked to our financial advisors. We talked amongst the board. We took the time to look at, well, who else might be out there, and what else might that look like, and what's actionable? We did that work, sort of during the process, to make sure we really understood what the potential might be. Most importantly, we're getting a full value from ONEOK in this transaction. We think it fully values our company. We also asked ourselves the question: What if we're wrong? Wrong. What if there's is somebody out there, even though we've done the work to determine that it's unlikely, what if there is somebody out there that might have a superior or better deal? What we focused on then, was making sure in the merger agreement that we had terms, that while we can't go solicit while we're pending the closing, we can't go solicit. If someone has a better idea or a better deal, they can bring it, and we think we did a good job getting the hurdles or the breakup fee that someone might have to overcome in order to do that at the low end of the range. It's still in a reasonable range, but it's at the low end. We removed impediments, we believe, that could keep someone of interest that has a better deal from approaching us. The idea was, we think we have a pretty good idea of what's actionable. We think we know in this deal, we have a full value in front of us. If we're wrong, someone else can, you know, at some point, prove it by showing up with a better deal if they choose to. That's how we thought about the process. Rather than running sort of a more traditional auction, we think we ended up in the same place in terms of being able to feel good that we got a clearing value when you look at the totality of the deal, including the terms. In terms of a C corp, the last part of your question, you know, we did some work a few years ago where we put some analysis out of how we looked at C corps. We're. C corp has always stayed sort of on the back burner for us, in the sense that we're always aware of what that might look like. For us, if you looked at, so let's just look for a moment and think as we're just standalone. Let's just say we decided that we wanted to convert to a C corp. Well, we already traded a healthy multiple as an MLP. If you look at the delta between where we trade and C corps today, or even back then, there was at one point, a little bit of a gap where C corps were more valuable, and maybe a little different today. We already traded a really good multiple. One of the some of the logic behind converting to a C corp would be, you know, convert to a C corp, and that would open up Magellan to a broader set of folks that are willing to hold C corps than they are MLPs. It would also open you up for passive investments, index inclusion, and those things. Those are all unknown. In other words, what value uplift will you get when you convert? What you do know is if you convert, you're going to pay taxes as a corporation. When you put that together with what is an unknown uplift, it becomes a difficult decision to make on a standalone basis, 'cause you really don't know how to measure the gives and gets. Was it a good decision or not a good decision? You won't know it until you do it, right? Well, now, juxtapose that as a standalone approach to converting to a C corp and look at the combination that's in front of us. Let's think about the unknowns in the first instance, and think about the knowns here. The knowns here are the combined company will be in S&P 500, so you know you're in the index. The known here is you're getting a premium and a full value for your business. That's a known. There are a lot more knowns in this transaction in terms of the conversion, and it's all about the premium value we're delivering for our unitholders in the process. Converting, on a unilateral basis, the C corp has a lot of unknowns. This transaction has much fewer, and it has a value that we can all see. Got it. That's very helpful there. It sounds like a lot fed into the valuation analysis. Were there any other elements to thinking about, proper fair value for the partnership that went into your process, or is that gonna cover the process as a whole? Well, for us, there's a key thing to understand. The first one is we've been very vocal over the last few years, that we believe that we have been undervalued in the market. We haven't been shy about it. Not only do we believe that we have been undervalued in the market, but we've been buying back units. You know, over the last three years, we bought back 12% of our outstanding units, a little over $1.3 billion, buying units back. We were doing that because we felt we were undervalued. How does one determine they're undervalued, right? That's where it dovetails into this process. How we determine whether or not we felt we were undervalued, it was, did the traditional math. We looked at our firm, we looked at what we thought it was going to earn. We did that over a very long period of time and came up with a discounted cash flow, unlevered, for the technical folks in the room, value of what our firm is. We've kept that updated for 3 years, 'cause you can't have a buyback program without having some view of value if you're only going to buy back, if you think that there's value in it, right? We have all this work we've done over 3 years about, you know, what is our firm worth? It's current. This transaction comes along, and sure, there's a comparison that you make to where you're trading in the market, but there's also a comparison you have to do, or we felt we had to do, to the intrinsic value of our firm. Regardless of what the market value was put on it, what is the value of the firm? We think this combination chins that bar or is better. That's when we say full value, we say with fair value, it's that intrinsic value that we're focused on, because in our mind, that's the real value. That's how we determined it. It's work we've been doing for 3 years. We know what the firm is worth, and this combination, just on a present value basis, chin to that bar. Beyond that, if you look at the combined business, it's not just the value today, the fair value, it's also what is the combined company going to be worth? You know, the deal here is $25 of cash plus 23% of the combined entity. That's really the deal. If you look at what we think the value of that pro forma company can be, we think it's going to be higher than what we can achieve on our own. It's not only the value you're getting, we have to make sure that's fair, but it's also the value you see in the pro forma company, that we're very excited about, frankly. Got it. That's very helpful there to think through your analysis. Tax is an area where we've received a lot of questions, and tax basis, especially for long-term unitholders. Could you walk us through, I guess, how that factored into your analysis? Well, there were a lot of discussions about taxes, Jeremy, during this whole process. You know, anyone that's followed the MLP space for a while knows that whenever you're looking at a transaction like this, you're going to talk about taxes. It's just part of the MLP structure that you have to understand and evaluate. We're no different. We're an MLP, so we need to understand it. We took the time to literally look at the trade groups that own our units. I don't want to get too technical, but the tax position you're going to be in will depend upon when you bought your unit and for how long you've held it. Those are the two really important things to understand. What we wanted to understand was, we have this fair value of the firm, what happens if you take that fair value of the firm, you know, you sort of tax affect it, you compare that to essentially the combination that's on the table, and how do they stack up? The conclusion we reached was that this combination, we believe, is in the best interest of all of our unitholders, even on an after-tax basis. Part of the reason we reached that conclusion was that the taxes that will be realized on closing are taxes that our unitholders, for the most part, already owe. The, the part that's incremental to this is only the part of the capital gains that's related to the premium that we're getting. If you just step back, the taxes that our unitholders will owe are taxes they already owe. Let's use an example, if I could, for a moment. If you looked at May twelfth of this year, that's the last unaffected price before we announced this combination, we were trading for around $55.41. If you wanted to realize that as one of our unitholders, and you sold at $55.41, you're going to pay these taxes. Depending on which trade group you're in, it will determine how much that is. You're going to pay, let's just say, for example, it's $20. Let's pick a high number, $20. You've held this a long time. You'd only realize $35. $35.41 in this example. Compare that to this transaction, which at announcement was $67.50. Do the same math. Take out, instead of $20, take out $24, because we're getting a premium. You get a number that's higher than what you could otherwise realize by about $8 or $9. You're better off under the transaction, after the transaction, than you are selling at the previous market price. That's the reality, is that our unitholders already owe it. The second thing about taxes that's important. This is probably the most difficult piece of the equation for our unitholders to really grasp. That is, if you don't wanna sell the unit and you wanna just essentially defer these taxes... Don't sell it. I don't wanna pay the $20 that I already owe. I know I owe it, but I wanna pay it in the future. I'm just gonna hold my unit and pay those taxes in the future. What needs to be understood, and what we're trying to make sure is really clear, is that our unitholders, from this point forward, are going to face higher taxes each year. The taxes that we're going to owe on the distributions that we pay will be increasing. The idea of holding and avoiding a tax burden isn't really an option. An example of that would be for some of our longer-dated or longer-tenured unitholders, say, they've owned this for 10 years or longer, that tax that they owe could be as much as 60% of the distribution that we pay them in 2026. The idea that I'm gonna avoid paying these taxes by simply not selling my units, in any event, frankly, and holding it and avoiding taxes along the way, it just doesn't, that's not how this is going to work. The taxes are going up. You have to understand both of those things, and at the end of the day, the taxes will be owed. There's one very limited exception to how you might not pay these taxes, and that is to pass away and pass them on to your heirs. The longer that event is, which we all hope everyone has a long, fruitful life from where they're at. We're not going to wish sort of death upon our unitholders. The longer that date out is in time, the more taxes you're going to pay along the way, and the less value that benefit will have to you. Our job is to make sure all of our unitholders understand that from here, looking forward, what's their situation? We think once they understand it, they'll come back to the central premise. There's really two. There's a full value for the firm that we're getting in the combination. It's full value. Second, the combined company, we believe, will be worth more than Magellan standalone. Thirdly, you're not gonna avoid these taxes absent passing away, and we don't wish that on anyone. Got it. Mortality is a difficult part of active management. Understood. Maybe kind of, you know, I don't know if you're able to comment on, I guess, what receptivity is. Sounds like there's a lot of investor education, if that's something that you're able to talk about, or we could move on to synergies for the combined entity as you see it. Well, let's talk about the sentiment and how people are receiving this. I think it's important. I think most of our largest shareholders or unitholders are still in very much the assessment, understanding phase. You know, we just put the preliminary proxy out. We've just put out this supplemental information that's meant to help them understand at least how we see the world, and we think they're absorbing that, and that's good. That's what we want to have happen. We think, you know, through time, as people will absorb this information, we have conversations with our unitholders. We're gonna be able to, you know, sort of cut through some of the fog that is out there around the deal and at least have them see the value proposition through the lens through which we see it. The reaction has been, Thanks for putting it out. We're really gonna study it, and we're anxious to talk more. We think that's a good thing. We have open minds, which is a good thing. In terms of the synergies, let's talk about that for a moment as well. I appreciate you bringing it up. Just to put us all on the same page, we expect the synergies from this deal to be between $200 million and $400 million plus. If you look at the S-4, what you'll see in most of our forecasts, we sort of centrally focused on the $200 million, which is the low end of that synergy range. That $200 million on the low end of the synergy range, the deal works from our perspective. The combined company should be worth more going forward, even at the low end of the synergy range. If you want to break the $200 million down, about $100 million of that we expect to come from cost synergies, primarily back office work, you know, back office activities, redundancies, things that when you look at a combined company, you don't need two of, or things that you can do better. That's $100 of the $200. The other $100, we think, will be commercial synergies, it's going to be commercial synergies that get us to the upper end of that range. The point I would make is that even with conservative synergy numbers, I don't think anyone would argue that those are heroic. The deal makes sense, and then to the extent we do better than that, which we expect to, it's really gonna start making sense. What's gonna get us to that end where it really starts making sense? It's really gonna be things like optimizing the assets among the two businesses. That's an area. An area that we're really focusing on is, as this company today, we buy NGLs, butane in particular, and we blend that into gasoline. You know, we believe that going forward, we're gonna be able to find efficiencies through that entire value chain that we couldn't find independently. We're just gonna be more efficient in how we procure, store, move, make butane available, and then blending it into our system. That's another area that's going to find synergies. Between the optimization and the blending and the cost structures, the $200 million is the low end of the range. We think we're going to be able to, through time, get to the upper end of that range. Even if we're wrong and don't get to the upper end of that range, the deal works. That's very helpful. Again, I'm not sure exactly how much you're able to comment at this point, but there's been some public opposition to the Magellan deal, and so I'm just wondering, to the extent you were able to provide thoughts in that direction and anything else, I guess, on vote in general, to the extent you're able to comment. Sure. You know, I'm not going to get into it. I appreciate the question, and I know, I think we should talk about it. You know, we're not going to get into a tit for tat for, with our unitholders. They're entitled to their opinions to view this deal, ever how they want to view it. What our job is not to get into an argument with our unitholders, but to explain why we think this is in the best interest of unitholders. That's what we're trying to do. That's what the supplemental information that we put out yesterday is intended to do. It's meant to show the reasons why we think this is in all of our unitholders' best interests. Even those who may disagree with this in certain respects, we still think it's in their interest. We can agree to disagree. Those things are, it's a full value. The combined company is more attractive, higher growth, more resilient than our business standalone, and the taxes are something you're gonna owe anyway. We didn't spend a lot of time on that. I'm not gonna rehash it. You're gonna owe them anyway. And if you believe that, it all comes back to value. We think the value is there, both in the pro forma company and in the consideration we're receiving. We think as we continue to talk about this, and we help people understand the equation that we see, we're gonna be successful with this vote, and get to closing. Got it. I think we've touched on the deal in many different directions. Are there any salient points that we haven't touched on that we should be thinking about at this point? I think the only other salient point, it's a bit of a soft issue, but I think it's interesting from our perspective. There's a lot of emotion around this transaction. It's really interesting, frankly. We have a lot of unitholders that have been with us a long time. We're really appreciative of them. We've tried to run this company as best we could possibly run it. I think we have a really good reputation of being unitholder-friendly, disciplined, focused on value, all those things that investors love. I think we've done a reasonably good job of that through the years. We've made our investors a lot of money. I think there's just a sense of sadness in some respective that there's going to come a point in time where you're not going to see a Magellan ticker symbol out there, and I think that's an emotional thing for a lot of our investors. Frankly, it's an emotional thing for much of management. At the end of the day, I mean, I can look around the room and see men like Paula, Jeff, Bruce. We've been here since the get-go, the beginning of this. There's a little emotion for us as well. At the end of the day, our job is to create value, to maximize value, and that's what we're doing. That's what we believe this combination does. At the end of the day, that's our job, that's what we're going to do. Got it. That makes sense. I think we're down to our last three minutes, and we haven't touched anything fundamental yet. Is there anything fundamental conversation to the Magellan business that you wanna touch on in the past, in the final few minutes of our talk here? Yeah, this will be a great bridge conversation, actually, 'cause I think it's a way for us to talk both about the combination and the fundamentals. Our business is doing well. Refined product demand is stable, slightly growing in certain areas. It's going to be a really good business for a really long time. It's currently a good business. Everything is going very well. If you look at our crude oil business, you know, it's had some challenges just with the overcapacity. That's nothing new. Our team's doing a really good job. We've got really good contracts. Cash flow is really stable. When you put our business together, it's doing really well. If you look at the commodity environment this year, it's been really favorable for us. We're still highly confident in our business. It's gonna be relevant for a really long time. It's gonna generate, we believe, a lot of cash flow for a really long time. We're gonna take that, and we're gonna put it together with another really good business and have a stronger business. Things are going well. This is a great year so far for us. We expect it to continue that way. We're going to take that, put it together with another really strong business and have an even stronger business. On the refined product pipeline side of the business, as far as publicly available information is concerned, it seems like things are tracking, in line with expectations as set out in the guidance, last time around, or anything else noteworthy? It's certainly tracking our guidance. You know, we expected this year refined product volumes to grow 1%, so 2023 over 2022, grow 1%. You also have to keep in mind that 2022 was a record. You know, as a company, we're continuing to grow. You have to keep that 1% in perspective. Certainly not declining, we're thankful for that. Well, I think we're down to our last minute here, and so I don't know if there's any final thoughts that you want to share with the audience on the fundamentals or otherwise. At the end of the day, appreciate being here again. What I would highlight is, we think the trend, the merger maximizes our unitholders' value, including on an after-tax basis. The value that we're receiving is full. The company is gonna be stronger on a combined basis. The taxes, we understand they're sensitive. Once you understand you're gonna owe them one way or the other, it all comes back to where we began. That's value. We think this combination provides it. Got it. Makes sense to us. We greatly appreciate you taking the time- Glad to do it. so much. Yeah, glad to do it. Thank you all.