Pipeline companies  (NYSE: OKE) and Magellan Midstream Partners (NYSE: MMP) are merging to create a $60 billion energy infrastructure giant. The transformative transaction will form a much more diversified energy midstream company. The deal also has significant financial and tax benefits, enhancing the combined company's ability to support a high-yielding dividend.

However, despite those positives, the combination is a bit of a head-scratcher since the pairing isn't a great strategic fit. Here's a closer look at the deal and why it might not pay off in the long run.

ONEOK is acquiring Magellan Midstream Partners in a cash-and-stock transaction valued at $18.8 billion, which includes the assumption of Magellan's debt. ONEOK is paying $25 billion in cash and 0.667 shares for each of Magellan's common units. That gives it an implied deal price of $67.50 per unit, a 22% premium compared to last Friday's closing price. That's a big-time premium for the 7.6%-yielding master limited partnership (MLP). 

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Source Fool.com