Midstream companies remain an attractive target for private and public entities that are drawn by the need for infrastructure and the promise of steady returns. Debt and equity deals slowed moderately in May, although the overall number and size of investments in the sector remained active.

A total of nine acquisitions were announced in May for a total of $9.5 billion in private and public capital. Four equity deals were announced worth a total of $841 million while four separate debt deals were announced for a total of $4.8 billion.

The most surprising announcement came from Energy Transfer Partners LP, which plans to buy Sunoco Inc. in a cash and stock transaction worth $5.3 billion. The details include $25 in cash and 0.5245 of Energy Transfer Partners common units for each Sunoco share. The value for each Sunoco shareholder is about $50.13 per share, a price representing a 29% premium to the 20-day average closing price of Sunoco shares when the deal was announced. Sunoco owns and operates pipelines, terminals, crude oil and marketing assets. It also has a network of 4,900 retail locations in 23 states. It owns refineries in Philadelphia and Marcus Hook, Pennsylvania, but has announced plans to exit that industry.

Energy Transfer has expanded aggressively through acquisitions in the past 12 months. The deal would be the largest since it closed on the $5.4 billion purchase of Southern Union Co. in March. In addition, it has agreed to buy LDH Energy Asset Holding LLC for $1.93 billion.

Upon closing, Sunoco shareholders are expected to own some 20% of ETP common units. Sunoco will continue its plans to exit its refining business as previously announced and continue its plans for a proposed refinery joint venture with the Carlyle Group. If approved, Sunoco Logistics Partners LP would continue to trade as an independent MLP, but its general partner would then become Energy Transfer Partners.

A separate midstream acquisition is the announcement that Suburban Propane Partners LP would acquire the retail propane business of Inergy LP for $1.8 billion in stock, cash and debt. Under the details of the deal, Suburban will pay $200 million in cash and $600 million in common units and offer to exchange as much as $1 billion in senior notes.

Inergy's propane distribution unit has 600,000 customers in 33 states. Upon closing, the acquisition will make Suburban the third-largest U.S. propane distributor by volume, expanding its sales into 11 new states. Suburban plans to issue $250 million in additional equity to fund the purchase, although details of that issue are still pending.

The largest public debt placement in May came from Cheniere Energy Partners LP, which announced it has arranged to borrow up to $4 billion to finance the construction of a gas liquefaction plant for export. The deal includes capital from eight separate financial institutions and would allow Cheniere to build the plant at its facility in Sabine Pass, Louisiana. Blackstone Group LP said in February it would invest $2 billion in Cheniere to help fund the plant's construction.

Comments