Sunoco will purchase an interest in Energy Transfer Partners fuel distribution business
Sunoco LP (ticker: SUN) and Energy Transfer Partners LP (ticker: ETP) announced today the second dropdown of a portion of ETP’s retail business to SUN, according to a company press release.
SUN has agreed to acquire from ETP Retail Holdings, an affiliate of ETP, a 31.58% equity interest in Sunoco LLC, which distributes approximately 5.3 billion gallons of motor fuel annually to the east, Midwest and southeast regions of the United States. The transaction is valued at approximately $816 million. SUN will pay $755 million in cash and issue $40.8 million of SUN common units to ETP Retail Holdings, based on the five-day volume-weighted average price of SUN’s common units as of March 20, 2015.
The company plans to fund the acquisition through a private offering of $800 million in senior notes due 2023. Sunoco Finance Corp., a wholly owned direct subsidiary of Sunoco, will serve as co-issuer of the notes. The company plans to use the proceeds to help repay outstanding borrowings under its senior secured revolving credit facility in addition to funding the ETP deal.
The first Sunoco dropdown was completed on October 1, 2014, and focused on the company’s convenience outlets. According to Martin Salinas, ETP’s CFO, “We dropped the Mid-Atlantic Convenience Stores and Tigermarket or MACS for short in a transaction valued at $768 million, consisting of $556 million in cash and approximately 4 million newly issued Sunoco LP units.” According to Salinas, the cash received from the dropdown was used to repay the company’s revolver borrowings.
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