Pipeline firm to buy Sunoco for $5.3B
Energy Transfer deal includes refinery unit
5/1/2012NEW YORK — Energy Transfer Partners LP is to buy Sunoco Inc. in a $5.3 billion deal that creates one of the more diverse pipeline companies in the country.
The acquisition includes nearly 8,000 miles of pipeline as well as 4,900 gas stations in 24 states. Those stations will keep the Sunoco brand name and its diamond-and-arrow logo. The deal also includes a refinery business that Sunoco is trying sell. Sunoco sold its refinery on the Toledo-Oregon border to PBF Holding Co. in late 2010.
The boards of both companies have approved the deal, which is subject to approval of shareholders and regulators. It's expected to close in the third or fourth quarter of this year.
Energy Transfer is primarily a natural gas pipeline company. Sunoco's pipeline network will allow the Dallas company to expand into moving crude oil and refined petroleum products from the Great Lakes and Northeast to refining centers along the Gulf Coast. Sunoco's pipelines have been in high demand thanks to a boom in drilling for gas and oil in shale rock.
The agreement works out to $50.13 a Sunoco share. Those closed $8.38 higher, at $49.29, Monday in trading on the New York Stock Exchange.
Kelcy Warren, Energy Transfer's chairman and chief executive officer, Kelcy Warren said the company has been looking to diversify into oil pipelines in response to an expected slowdown in the natural gas pipeline business.
Natural gas prices are at 10-year lows, and some oil and gas production companies have been taking natural gas operations offline.
Pipeline companies make money by charging fees to transport oil, natural gas, and other fuels around the country.
When supplies grow and storage facilities fill up — as is the case with U.S. natural gas — there's less of a need to transport the fuel, and that means lower revenue for the pipeline company. By expanding its offerings to crude oil and other fuels, Energy Transfer can enter different markets where there still is a lot of demand.
The acquisition continues a run of deal-making for Energy Transfer.
The Dallas company bought Louis Dreyfus Highbridge Energy for $1.93 billion in May, 2011.
And Energy Transfer Equity, which owns Energy Transfer Partners' general partner, bought Southern Union for more than $5 billion in March and Regency Energy Partners for $300 million in 2010.
Under the deal, Sunoco Inc. is to remain based in Philadelphia and continue its exit from the refining business.