Supply Chain News / Economic Development / Finance & Credit

Energy Transfer Partners to Acquire Sunoco in $5.3 Billion Transaction

April 30, 2012
/ Print / Reprints /
ShareMore
/ Text Size+

Energy Transfer Partners and Sunoco Inc. announced that they have entered into a definitive merger agreement whereby ETP will acquire Sunoco in a unit and cash transaction valued at $50.13 per share, or a total consideration of approximately $5.3 billion, based on ETP’s closing price on April 27, 2012. 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, terminalling and logistics of crude oil, NGLs and refined products.

The merger consideration, which consists of $25 in cash and 0.5245 of an ETP common unit, or approximately 50 percent cash and 50 percent ETP common units, represents a 29 percent premium to the 20-day average closing price of Sunoco shares as of April 27, 2012. By acquiring Sunoco, ETP will also own Sunoco’s general partner interest and the incentive distribution rights (IDRs) in Sunoco Logistics Partners (NYSE: SXL), as well as Sunoco’s 32.4 percent interest in Sunoco Logistics Partners’ limited partner units and Sunoco’s branded retail business, which generates additional stable cash flows from a portfolio of approximately 4,900 retail locations in the U.S.

“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,” said Kelcy Warren, ETP’s chief executive officer and chairman of the board of directors. “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. With this transaction, we make a major move in that direction, bringing our cash flow mix related to the combined enterprise’s pipeline businesses to approximately 70 percent natural gas and 30 percent heavier hydrocarbons. At the same time, we will enhance the size and scale of the ETP platform by creating new service capabilities and entering new geographic operating areas.”

“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,” said Brian P. MacDonald, Sunoco’s president and chief executive officer. “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.”

Commenting further, MacDonald said, “ETP recognizes that the steady, ratable cash flows that our logistics and retail businesses generate are backed by great assets, deep expertise, and the potential for future growth. ETP has an interest in growing its Marcellus Shale-related activity, and I am pleased that the combined enterprise will retain a strong Pennsylvania presence.”

Other Transaction Details

Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both companies, Sunoco shareholders can elect to receive, for each Sunoco common share they own, either $50.00 in cash, 1.0490 ETP common units or a combination of $25.00 in cash and 0.5245 ETP common units. The aggregate cash paid and common units issued will be capped so that the cash and common units will each represent 50 percent of the aggregate consideration. The cash elections and common unit elections will be subject to proration to satisfy this cap. Upon closing, Sunoco shareholders are expected to own approximately 20 percent of ETP common units. In addition, $965 million of Sunoco’s existing notes will remain outstanding.

In conjunction with the transaction, Energy Transfer Equity, L.P. (NYSE: ETE), the owner of Energy Transfer Partners’ general partner, has agreed to relinquish its right to approximately $210 million of incentive distributions from ETP that it would otherwise be entitled to receive over 12 consecutive quarters following the closing of the transaction.

Sunoco’s logistics and retail businesses will continue to maintain headquarters in the Philadelphia area consistent with their current operating presence. In addition, under the merger agreement, Sunoco will continue its plans for exiting its refining business as previously announced, as well as continue its plans for the proposed refinery joint venture being discussed by Sunoco and The Carlyle Group.

Combined Corporate Structure

The transaction has been approved by each company’s board of directors and is expected to close in the third or fourth quarter of 2012, subject to approval of Sunoco shareholders and customary regulatory approvals. Following the closing, Sunoco and Sunoco Logistics Partners will operate under the Energy Transfer Equity, L.P. umbrella of companies. By acquiring Sunoco, ETP will own Sunoco’s general partner interest, limited partner interest and the incentive distribution rights in Sunoco Logistics Partners.

Sunoco Logistics Partners will continue to be traded on the NYSE as a separate publicly traded MLP.

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

KC SmartPort Momentum

Kansas City SmartPort Momentum 2013 focused on 3PLs, the issues facing the industry, and the role or logistics in economic development

Podcasts

 

Calculating a true landed cost for global sourcing directly correlates with the profitability of purchased goods. However, few companies can command real-time visibility in to all the costs involved for cross border movements. In this podcast, World Trade 100 and Amber Road highlight how a comprehensive global trade platform that converges both logistics and compliance costs can deliver true landed cost visibility.

 

Speaker: Hung Lee, Senior Product Manager, Amber Road

More Podcasts

THE MAGAZINE

World Trade 100 Magazine

april cover wt100 2014

2014 April

Check out the April 2014 edition of World Trade WT100, featuring articles on fueling changes for trucking plus much more!

Table Of Contents Subscribe

Supply Chain Disruptions

Which are the most common causes of disruptions in your supply chain?
View Results Poll Archive

WT100 STORE

world-class-warehousing.gif
World-Class Warehousing and Material Handling, 1st Edition

Filled with proven operational solutions, it will guide managers as they develop a warehouse master plan, one designed to minimize the effects of supply chain inefficiencies as it improves logistics accuracy and inventory management - and reduces overall warehousing expense.

More Products

Clear Seas Research

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications,Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.

Use our interactive maps to locate service providers across North America.Interactive Map

Logistics Development Partners 

IWLA Members

STAY CONNECTED