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Energy Transfer Partners (ETP) To Buy Sunoco (SUN) For $50.13/Share

 April 30, 2012 09:06 AM
 


(By Balaseshan S) Natural gas company Energy Transfer Partners LP (NYSE:ETP) is purchasing Sunoco Inc. (NYSE:SUN) in a unit and cash deal valued at about $5.3 billion or $50.13 per share, to widen its presence in crude oil transportation business. Following the news, ETP stock traded up 2.57% and SUN jumped 21.17%  in the premarket.

The merger consideration, which consists of $25 in cash and 0.5245 of an ETP common unit, or about 50% cash and 50% ETP common units, represents a 29% premium to the 20-day average closing price of Sunoco shares as of April 27.  The transaction will be immediately be accretive to the earnings of Energy Transfer Partners.

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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 transaction is expected to close in the third or fourth quarter of 2012, subject to approval of Sunoco shareholders and customary regulatory approvals.

Upon closing, Sunoco shareholders are expected to own about 20% of ETP common units. In addition, $965 million of Sunoco's existing notes will remain outstanding.

By buying 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% interest in Sunoco Logistics Partners' limited partner units and Sunoco's branded retail business, which generates additional stable cash flows from a portfolio of about 4,900 retail locations in the U.S.

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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 about $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.

Following the closing, Sunoco and Sunoco Logistics Partners will operate under the Energy Transfer Equity, L.P. umbrella of companies. Sunoco Logistics Partners will continue to be traded on the NYSE as a separate publicly traded MLP.

ETP closed Friday's regular session at $47.92, while SUN ended at $40.91.

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