MLP ETFs in Focus after MLPX -- MarkWest Deal - ETF News And Commentary

Refinery and pipeline company Marathon Petroleum Corp 's ( MPC ) master limited partnership

("MLP"), MPLX LP ( MPLX ), is set to acquire natural gas processor MarkWest Energy Partners LP

( MWE ) for $15.8 billion. The combined entity is expected to have a market cap of $21 billion -

the fourth-largest MLP by market value.

Under the terms of the agreement, MarkWest unit holders will get 1.09 shares of MPLX and

$3.37 in cash for each share held - which sums up to the total offer price of $78.64 per share - a

32% premium to MarkWest's Friday closing price of $59.75 a share. The deal is expected to be

sealed by the fourth quarter of 2015. Marathon Petroleum will contribute $675 million to fund

the cash payment of the deal.

The deal is expected to widen MPLX's network of crude oil and product pipelines in the U.S.

Midwest and Gulf Coast regions as MarkWest's natural gas processing facilities will now be a

part of its oil portfolio. MarkWest, which processes and transports natural gas and operates in

fields such as Pennsylvania's Marcellus shale and Oklahoma's Utica shale, has been a huge

beneficiary of the U.S. shale gas boom.

"MPC's strong balance sheet and liquidity will enable MarkWest to accelerate organic growth in

some of the nation's most economic and prolific liquids-rich natural gas resource plays," per

Chief Executive Gary Heminger . Moreover, the deal would boost the dividend payout of the

combined entity by 25% through 2017, says Heminger.

As MLPs are structured as pass-through entities, they do not pay taxes at the entity level and

are thus able to pay out most of their earnings to investors. Moreover, MLPs are always looking

out for expansion to increase their size and their dividends.

Market Reaction

Shares of MarkWest and Marathon Petroleum saw a boost in their prices, while shares of MPLX

closed 15% lower at $59 on Monday's trading session. MarkWest closed 14% higher at $68.09,

while Marathon Petroleum rose 7.9% on Monday. Also, most of the MLP ETFs saw gains in

excess of 1% on Monday.

Below we have highlighted three ETFs having exposure to MarkWest. Investors can keep an eye

on these ETFs for further gains if any (read : A Weak Start to 2015 for MLP ETFs: Buy on the

Dip? ).

Alerian MLP ETF ( AMLP )

AMLP is the most popular product in the space with an asset base of $8.6 billion and an average

trading volume of more than $4.5 million shares. The fund has a dividend yield of 7.45% and

gained 1% on Monday.

The fund tracks the performance of the Alerian MLP Infrastructure Index to provide exposure to

energy infrastructure MLPs that earn the majority of their cash flow from the transportation,

storage, and processing of energy commodities. MarkWest Energy occupies the second spot

with 8.51% allocation, behind Enterprise Products Partners which takes the top spot with 10%

weightage.

Though AMLP's expense ratio before deferred taxes is 0.85%, the gross expense ratio is

currently extremely high at 8.56%.

InfraCap MLP ETF ( AMZA )

The actively managed fund seeks to provide a high level of steady income and capital

appreciation by providing exposure to a portfolio of high-quality, midstream energy MLPs and

related general partners.

MarkWest Energy scores among the top five holdings with 9.12% exposure. The fund charges

1.05% as annual fees and was up 2.12% on Monday. The fund currently manages an asset base

of $17 million and trades with low volumes of 16,000 shares.

MLP ETF ( MLPA )

The fund looks to track the Solactive MLP Composite Index. The Index comprises MLPs engaged

in the transportation, storage, processing, refining, marketing, exploration, production, and

mining of natural resources. The fund charges 45 bps in fees.

The fund has garnered about $152 million in assets. Enterprise Products, Energy Transfer Equity

and Plains All American Pipeline take the top three spots. MarkWest is also among the top ten

holdings with 5.29% exposure. The fund had gained 1.27% on Monday and has a dividend yield

of 6.87%.