Current SXL Stock Info

Continuing the recent trend of multibillion-dollar mergers in the midstream sector, Sunoco Logistics Partners L.P. (ticker: SXL) and Energy Transfer Partners, L.P. (ticker: ETP) announced that they have entered into a merger agreement in which Sunoco will acquire ETP in a unit-for-unit transaction worth $20 billion.

CEO Kelcy Warren is seeking to merge the two pipeline arms of his Energy Transfer group in order to simplify the number of publicly traded businesses. Philadelphia-based Sunoco will acquire Dallas-based Energy Transfer Partners, with the publicly traded Energy Transfer Equity remaining the overall parent business.

The deal has been described as the first “Trump deal” by CNBC’s Jim Cramer and has the potential to receive upside if the President-elect allows the Dakota Access Pipeline to move forward.

The transaction was approved by the boards of directors and conflicts committees of both partnerships and is expected to close in the first quarter of 2017. The combined partnership is expected to be the second largest MLP as measured by enterprise value.

Sunoco said in its press release that management at both companies were “pleased to be able to bring two strong partnerships together in this strategic transaction that combines the premier crude oil midstream MLP with the premier natural gas midstream MLP.”

ETP Simplifies Structure with $20 Billion Sunoco Acquisition

Source: Sunoco, ETP Investor Presentation

The merged company is expected to have “increased scale and diversification across multiple producing basins. It is also anticipated to provide greater opportunities to more closely integrate Sunoco’s natural gas liquids business with ETP’s natural gas gathering, processing and transportation business.” Sunoco and ETP expect that the transaction will allow for commercial synergies and costs savings in excess of $200 million annually by 2019.

The transaction is also expected to strengthen the balance sheet of the combined organization by utilizing cash distribution savings to reduce debt and to fund a portion of the growth capital expenditure programs of the two partnerships. ETP and Sunoco have spent approximately $15 billion in organic growth capital over the past several years.

At the closing of the deal, the Chief Executive Officer, Chief Commercial Officer, President and Chief Financial Officer of the combined partnership will be Kelcy Warren, Mackie McCrea, Matt Ramsey and Tom Long. Mike Hennigan and other members of the Sunoco management team are expected to continue in leading management roles of the combined company with the Sunoco business headquartered in Philadelphia.

Sunoco and ETP held a joint conference call to discuss the transaction details. The presentation is also available.


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