Energy Transfer, Sunoco To Merge In $5.3B Combination
To buy company with midsteam & downstream operations in U.S., gaining 34% stake in Sunoco Logistics Partners' which has 4,900 miles of crude oil trunk pipelines & approximately 500 miles of crude oil gathering pipelines in the southwest and Midwest U.S.
Energy Transfer Partners LP, Dallas, (NYSE: ETP) plans to acquire Sunoco Inc., Philadelphia, (NYSE: SUN) for $5.3 billion in cash and equity.
Energy Transfer will pay approximately $50.13 per Sunoco share in a combination $25 in cash and 0.5245 Energy Transfer unit, or approximately 50% percent cash and 50% equity. The deal represents a 29% premium to the 20-day average closing price of Sunoco shares as of April 27, according to Energy Transfer.
This combination will create one of the largest and most diversified energy partnerships in the country by expanding ETP’s geographic footprint and strengthening its presence in the transportation, terminaling and logistics of crude oil, NGLs and refined products.
Sunoco’s Logistics business operates refined product and crude oil pipelines and terminals and conducts crude oil acquisition and marketing activities primarily in the Northeast, Midwest and South Central regions of the U.S. Sunoco’s interests consist largely of its 34% ownership and general partner interests in Sunoco Logistics Partners L.P., which is a publicly traded master limited partnership.
The Sunoco Logistics Partners crude oil pipelines segment delivers crude oil and other feedstocks to refineries principally in Oklahoma and Texas. This segment includes approximately 4,900 miles of crude oil trunk pipelines and approximately 500 miles of crude oil gathering pipelines in the southwest and Midwest U.S.
Energy Transfer chief executive and chairman Kelcy Warren says, “This transaction, which will be immediately accretive, represents the next step in Energy Transfer Partners’ transformation into a more diversified enterprise with an integrated and expanded footprint. As we have said in the past year, our goal is to derive more of our distributable cash flow from the transportation of heavier hydrocarbons like crude oil, NGLs, and refined products.”
Pro forma, Energy Transfer’s assets will be 70% natural gas and 30% heavier hydrocarbons.”
Sunoco president and chief executive Brian P. MacDonald says, “This transaction will enable Sunoco’s businesses to realize their full potential by becoming an important part of a diversified leader in the energy industry. In addition, it delivers an attractive premium to our shareholders, while enabling them to participate in the future growth of the business. The combination with ETP provides substantial future value-creation opportunities for Sunoco shareholders and ETP unitholders alike.”
The deal is expected to close during the third or fourth quarter.
Wells Fargo Securities LLC is exclusive financial advisor to Energy Transfer, while Latham & Watkins LLP, Bingham McCutchen LLP and Morris, Nichols Arsht and Tunnell LLP are legal counsel.
Credit Suisse Securities (USA) LLC is exclusive financial advisor to Sunoco and Wachtell, Lipton, Rosen & Katz is legal counsel.