Energy Transfer Partners LP (NYSE: ETP) is buying U.S. refiner Sunoco Inc. (NYSE: SUN) in a $5.3 billion cash and stock deal that will allow the Dallas-based natural gas shipper and propane retailer to expand into heavier hydrocarbons. Sunoco shares rocketed more than 20 percent on the news.
The deal, announced Monday, equals $50.13 per Sunoco share. It includes about $25 in cash and just over half of an Energy Transfer Partners common unit. Shareholders of Philadelphia-based Sunoco can also opt instead for $50 in cash.
This transaction, which will be immediately accretive, represents the next step in Energy Transfer Partners' transformation into a more diversified enterprise with an integrated and expanded footprint, said the company's CEO Kelcy Warren in a statement. As we have said in the past year, our goal is to derive more of our distributable cash flow from the transportation of heavier hydrocarbons like crude oil, NGLs (natural gas liquids), and refined products.
Warren said the acquisition will bring the company's cash flow mix for its pipeline business to about 70 percent natural gas and 30 percent heavier hydrocarbons. Natural gas prices recently struck 10-year-lows.
The combination with ETP provides substantial future value-creation opportunities for Sunoco shareholders and ETP unit-holders alike, said Brian P. MacDonald, Sunoco's CEO.
The deal is expected to close in the third or fourth quarter, pending regulatory and shareholder approval.
In morning trading, ETP shares rose 59 cents to $48.51 and Sunoco shares shot up $8.26, or 20.19 percent, to $49.17.