By BEN LEFEBVRE
HOUSTON -- Energy Transfer Partners agreed to acquire
independent refiner Sunoco in a $5.3 billion deal that would
greatly expand the reach of Energy Transfer's pipeline system
but could also saddle the company with aging refineries.
Sunoco has been trying to sell itself since late 2011 after
posting losses for much of the past two years because of high
oil prices and decreasing fuel demand.
Finding a buyer for
the company and its aging refineries was considered a long-shot
despite Sunoco's profitable logistics and retail
Energy Transfer will gain 7,900 miles of crude oil and
refined fuel pipelines from Sunoco Logistics Partners master
limited partnership and give it a toe-hold in the Marcellus and
Utica shale regions, increasingly productive sources of oil and
Energy Transfer will also gain Sunoco's relatively
successful chain of 4,900 gasoline stations that it could sell
at a later date.
"You have to hand it to Sunoco," Morningstar analyst Jason
Stevens said. "They positioned the company as a retail and
logistics business, and Energy Transfer stepped up to the
Energy Transfer, a natural-gas pipeline operator, said it
will pay either $50 in cash, 1.0490 ETP common unit or a
combination of $25 in cash and 0.5245 ETP common units for each
The estimated $50.13 per-share value is a 23% premium to
Sunoco's Friday closing price. The stock is up 20% so far this
The deal is the second pipeline acquisition by the Energy
Transfer partnerships in the past year. In December, parent
partnership Energy Transfer Equity closed a $3.7 billion deal
for Southern Union Group, making it the largest natural gas
transporter in the country.
With Sunoco's pipelines, Energy Transfer Partners will be
able to expand its reach past the natural gas markets and into
the crude oil and refined products transportation business.
"There are synergies," said Global Hunter Securities analyst
Sam Margolin. "They're wanting to get more exposed to oil, and
Sunoco Logistics is certainly an oily MLP."
But the deal will also add Sunoco's aging Pennsylvania
refineries to Energy Transfer's portfolio. The refineries have
posted loses for much of the past two years because of
mechanical problems and their dependence on east coast oil,
priced much higher than those available to competitors in the
Midwest and Gulf Coast regions.
Sunoco, the second-largest independent refiner by capacity
behind Valero, shuttered its Marcus Hook refinery in 2011.
Earlier this month, Sunoco launched exclusive negotiations
with Carlyle Group to potentially form a joint venture that
would transfer operations of its Philadelphia refinery to the private equity
Sunoco will continue its plans for exiting the refining business, as well as
continue its plans for the proposed refinery joint venture being
discussed with Carlyle Group, an Energy Transfer spokeswoman
Energy Transfer expects to close the transaction by the
fourth quarter and said it will immediately add to
Energy Transfer Equity, the owner of Energy Transfer
Partners' general partner, has agreed to relinquish its right
to about $210 million of incentive distributions from ETP that
it would otherwise be entitled to receive over 12 consecutive
quarters following the closing of the transaction.
Sunoco shareholders will own about 20% of ETP common units.
In addition, $965 million of Sunoco's existing notes will
Sunoco Logistics Partners will continue to be traded as a
separate publicly traded master limited partnership.
Dow Jones Newswires