Current ETE Stock Info

Energy Transfer Equity, L.P. (NYSE: ETE) and Energy Transfer Partners, L.P. (NYSE: ETP) announced that an agreement upon the merger of ETP with ETE in a unit-for-unit exchange. In connection with the transaction, ETE’s incentive distribution rights (IDRs) in ETP will be cancelled.

Energy Transfer on Trend: Consolidates MLP

Transaction Structure; Source: Energy Transfer

ETP unitholders (other than ETE and its subsidiaries) will receive 1.28 common units of ETE for each common unit of ETP they own.

The consolidation is aimed at:

  • improving the combined partnership’s equity cost
  • simplifying the overall structure, which reduces complexity and improves transparency for investors
  • increasing cash distribution coverage and retained cash flow, thusly reducing its leverage ratio and the need for equity issuances to fund organic growth.

The merger is expected to be completed in Q4 2018 and continues the trend of pipeline companies consolidating into fewer entities. This is largely in part due to new U.S. tax law and recent rule changes with the Federal Energy Regulatory Commission that are devaluing MLP’s.

Kinder Morgan (NYSE: KMI) consolidated into one company back in 2014 and now Enbridge (NYSE: ENB), Williams Co. (NYSE: WMB), and Energy Transfer have done the same.

It is important to note that Energy Transfer will still maintain the MLP Structure but will now have less entities within it.

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