Targa Resources Buys Stakeholder Midstream for $1.25B
The all-cash deal expands Targa's Permian Basin footprint, targeting significant free cash flow with minimal new debt.
Targa Resources Corp. (NYSE: TRGP) announced Monday it has agreed to acquire Stakeholder Midstream, a privately held natural gas gathering and processing operator, in a $1.25 billion all-cash deal. The move significantly expands Targa's footprint in the prolific Permian Basin and was met with modest approval from investors, with shares rising over 1% in morning trading.
The acquisition adds a complementary system to Targa's existing infrastructure, including approximately 480 miles of natural gas pipelines and 180 million cubic feet per day of processing capacity. Targa's management framed the deal as a strategic "bolt-on" that enhances its service offerings, particularly in sour gas treating and carbon capture capabilities.
Shares of Targa Resources climbed 1.26% to $175.31 following the announcement. The deal, representing about 3.3% of Targa's $37.7 billion market capitalization, is expected to be immediately accretive to shareholder value. In a company press release, Targa stated the purchase price represents an attractive valuation multiple of approximately six times the asset's estimated 2026 unlevered adjusted free cash flow.
"This is a nice bolt-on asset that generates meaningful free cash flow, requires minimal capital, and has an attractive valuation," said Matt Meloy, Targa's Chief Executive Officer. The company projects the Stakeholder assets will generate around $200 million in annual unlevered adjusted free cash flow with low integration costs.
Financing for the acquisition will come from Targa's existing liquidity, including cash on hand and its $3.5 billion revolving credit facility. The company emphasized its commitment to maintaining a strong balance sheet, projecting a "limited impact to its leverage ratio." Targa expects to remain within its long-term leverage target of 3.0 to 4.0 times, a key metric for investors in the capital-intensive midstream sector.
This disciplined financial approach aligns with the prevailing sentiment among Wall Street analysts, who hold a largely positive view of the company. Targa currently has 21 'Buy' or 'Strong Buy' ratings from analysts, with only one 'Hold' rating and an average price target of $208, suggesting further upside potential.
The deal underscores the continued consolidation and strategic positioning within the Permian Basin, the engine of U.S. shale oil and gas production. As producers seek efficient and reliable pathways to market, midstream operators like Targa are expanding their networks to capture more volume. According to industry analysts, the acquisition not only adds physical infrastructure but also valuable, long-term acreage dedications from producers, ensuring a steady flow of resources through the system.
The transaction is expected to close in the first quarter of 2026, subject to customary regulatory approvals. Investors will be watching closely to see if Targa can seamlessly integrate Stakeholder's assets and deliver on the projected cash flow targets, further solidifying its competitive position in North America's premier energy basin.