Newest M&A Deal Between Sunoco & ETP Means More Synergies

NEWTOWN SQUARE, Pa. — More assets are changing hands in the Energy Transfer Equity LP family of companies, which includes convenience store operator Sunoco LP.

The latest move has Sunoco Logistics Partners LP (SXL) acquiring Energy Transfer Partners LP (ETP) in a unit-for-unit transaction. Under the terms, ETP unitholders will receive 1.5 common units of SXL for each common unit of ETP they own. This equates to a 10-percent premium.  

Newtown Square-based Sunoco Logistics Partners is a master limited partnership that owns and operates a logistics business consisting of a geographically diverse portfolio of complementary pipeline, terminalling, and acquisition and marketing assets which are used to facilitate the purchase and sale of crude oil, refined products, natural gas liquids, and refined products.

Dallas-based Energy Transfer Partners is a master limited partnership that owns and operates one of the largest and most diversified portfolios of energy assets in the United States. Its subsidiaries include Panhandle Eastern Pipe Line Co. LP (the successor of Southern Union Co.) and Lone Star NGL LLC, which owns and operates natural gas liquids storage, fractionation and transportation assets. In total, ETP currently owns and operates more than 62,500 miles of natural gas and natural gas liquids pipelines. ETP also owns the general partner, 100 percent of the incentive distribution rights, and approximately 67.1 million common units in SXL.

The acquisition has received the approval of both companies’ boards of directors, as well as the conflicts committees of both partnerships. The transaction is expected to close in the first quarter of 2017, subject to receipt of ETP unitholder approval and other customary closing conditions.

The newly combined entity will be called Energy Transfer Partners. An integration plan is expected to be substantially completed by the time transaction closes.

Upon closing, Kelcy Warren will be CEO, Matt Ramsey will be president, Tom Long will be chief financial officer, and Mackie McCrea will be chief commercial officer. It is expected that Michael J. Hennigan, president, CEO and director of SXL, and other members of the SXL management team will continue in leading management roles of the combined company.

As SXL will be the acquiring entity, the existing incentive distribution rights provisions in the SXL partnership agreement will continue to be in effect, and Energy Transfer Equity will own the incentive distribution rights of SXL following the closing of the transaction.

THE AFTEREFFECT

In regards to whether this transaction will have any impact of Sunoco LP, the retail arm of Energy Transfer Equity, executives only touched on this topic briefly during a joint presentation that took place Monday afternoon. They said nothing has changed for Sunoco LP since its last earnings call, and there are no plans to do anything with the retail arm except continue getting that business in good shape. To view the full presentation, click here.

Dallas-based Sunoco LP is a master limited partnership that operates approximately 1,340 retail fuel sites and convenience stores including the APlus, Stripes, Aloha Island Mart and Tigermarket banners. It also distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors located in more than 30 states at approximately 6,900 sites. Energy Transfer Equity owns Sunoco LP's general partner and incentive distribution rights.

The combined partnership of Sunoco Logistics Partners and Energy Transfer Partners will result in increased scale and diversification across multiple producing basins. There will also be greater opportunities to more closely integrate SXL's natural gas liquids business with ETP's natural gas gathering, processing and transportation business.

SXL and ETP expect to build upon their experience working together as partners in several joint ventures to pursue commercial opportunities and to achieve cost savings, while enhancing the service capabilities for their customers. SXL and ETP expect that the transaction will allow for commercial synergies and costs savings in excess of $200 million annually by 2019.

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