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Energy Transfer Partners Moves Susser Holdings to Sunoco LP

Energy Transfer Partners (ticker: ETP) announced that it plans a 100% dropdown of Susser Holdings Corp. (SHC) for approximately $1.94 billion to its subsidiary Sunoco LP (ticker: SUN). In addition, there will be an exchange for 11 million SUN units owned by SHC for another 11 million new Sun units to a subsidiary of ETP, according to the company’s press release.

For the dropdown, SUN will pay ETP approximately $970 million in cash and issue approximately 22 million SUN unites valued at approximately $970 million based on the five-day volume-weighted average price of SUN’s common units as of July 14, 2015.

Energy Transfer Partners said the decision for the dropdown was made in order to increase SUN’s exposure to the retail business. SHC’s operations consist primarily of retail activity through the operation of convenience stores in Texas, New Mexico and Oklahoma.

For SUN, the deal will offer new growth opportunities and allow it to focus on third-party acquisitions, the company said in its press release. For Energy Transfer Partners, the transaction is expected to be immediately accretive to distributable cash flow for 2015. SUN expects to reach breakeven on distributable cash flow in 2015, with the deal being accretive to its own cash flow in 2016.

ETP gives Energy Transfer Equity general partner interest in SUN in separate deal

In a separate deal announced the same day, ETP announced that it would give 100% of the general partner (GP) interest and the incentive distribution rights (IDRs) of SUN to Energy Transfer Equity (ETE) in exchange for 21 million ETP common units, currently owned by ETE. In addition to the ETP units, ETE will provide Energy Transfer Partners with a $35 million annual IDR subsidy for two years.

The transaction represents a current value of approximately $1.2 billion.

For ETE, this deal represents the next step in the company’s transition to a pure play general partner for the overall Energy Transfer group. Pro forma for this transaction, ETE expects to maintain its distribution growth rate while moving towards a 1.0x distribution coverage ratio.

The deal will reduce ETP’s common unit count by nearly 5%, solidify its current distribution and provide a positive catalyst for the company’s unit price, it said in its press release.

The transaction is expected to close in August of this year after the record date for second quarter distribution for both the SUN GP interest and IDRs and ETP common units, but will be effective as of July 1, 2015.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.