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ETP and Sunoco Logistics To Combine In MLP Mega Merger

Monday, November 21, 2016 8:17
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Two of the largest Master Limited Partnerships in the U.S., Sunoco Logistics Partners L.P. (NYSE:SXL) and Energy Transfer Partners LP (NYSE:ETP), have agreed to merge in a nearly $30 billion deal.

The move is bound to have wide implications in the energy space, which has seen a partial recovery this year amid oil’s bounce from multi-year lows.

The structure of the deal entails that Energy Transfer Partners will be acquired by Sunoco Logistics for 1.5 common units of SXL common stock for each unit of ETP. From the press release:

As SXL will be the acquiring entity, the existing incentive distribution rights provisions in the SXL partnership agreement will continue to be in effect, and Energy Transfer Equity (ETE) will own the incentive distribution rights of SXL following the closing of the transaction. As part of this transaction, ETE has agreed to continue to provide all the incentive distribution right subsidies that are currently in effect with respect to both partnerships. The transaction is expected to be immediately accretive to SXL’s distributable cash flow per common unit.

Both companies expect the transaction will create several commercial synergies, and result in $200 million worth of annual costs savings by 2019. SXL and ETP will also hold a joint conference call this afternoon at 4:00pm eastern time to discuss the move.

SXL shares fell $0.56 (-2.14%) to $25.63 in Monday morning trading, while ETP shares plunged $2.57 (-6.53%) to $36.80.

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