Log in
Forgot password ?
Become a member for free
Sign up
Sign up
Dynamic quotes 

4-Traders Homepage  >  Equities  >  Nyse  >  Kinder Morgan Inc    KMI

News SummaryMost relevantAll newsSector newsTweets 

Energy Transfer Partners to buy Sunoco for $5.35 billion

share with twitter share with LinkedIn share with facebook
share via e-mail
04/30/2012 | 09:31pm CET

Pipeline operator Energy Transfer Partners LP said it would buy Sunoco Inc for $5.35 billion in stock and cash to get into the more lucrative crude oil transportation business as natural gas prices stay weak.

The deal is the latest in a flurry of pipeline mergers spurred by development of shale oil and gas fields and master limited partnership (MLP) structures that have provided the pipeline industry with rich tax breaks.

Energy Transfer Partners is paying a 22.5 percent premium over Friday's closing share price, giving it confidence about completing the deal without a bidding war as occurred with the takeover of Southern Union, which closed last month.

"I feel that we're paying full value for this company," Energy Transfer Partners Chief Executive Kelcy Warren said when asked on a conference call about the possibility of a higher bidder for Sunoco emerging.

The acquisition will give Energy Transfer Partners control of Sunoco's general partner stake of its MLP, Sunoco Logistics Partners and 32.4 percent of the partnerships units.

Sunoco Logistics owns about 5,400 miles of crude oil pipelines, 2,500 miles of refined products pipelines and 42 million barrels of refined product and crude oil storage capacity at its terminals.

Development of shale oil fields in North Dakota and elsewhere has triggered an upheaval in the U.S. pipeline business, which traditionally focused on moving crude north from the Gulf Coast. As a result, nimble pipeline companies have been able to secure lucrative shipping commitments from producers anxious to escape inland gluts and access premium coastal markets.

Mike Breard, senior energy analyst at Hodges Capital Management in Dallas, said the inevitable regulatory complications of building new pipelines made existing assets particularly valuable, and the nature of the pipeline business meant pipeline owners could benefit from increased scale.

"You might as well manage 10,000 miles of pipeline as 1,000," he said. "A 12-inch pipeline's a 12-inch pipeline."

Plunging natural gas prices and new sources of production near big markets in the U.S. northeast threaten to undermine the profitability of some long-haul natural gas pipelines, so Energy Transfer aims to earn more from moving heavier hydrocarbons like crude oil, natural-gas liquids (NGLs) and refined products.

CEO Warren said the combined company's pipeline business would now get about 30 percent of its cash flow from heavier hydrocarbons. Energy Transfer is also looking at ways to convert current pipelines to transport NGLs or crude instead.

"There definitely needs to be a lot more crude oil infrastructure," said John Musgrave, a vice president at Swank Capital, whose Cushing MLP Asset Management LP owns a 0.27 percent stake in Energy Transfer Partners.

"There are still a lot of crude bottlenecks in the U.S.," Musgrave said, noting that a number of new NGL and crude heavy shale regions need more pipelines.

For each share they own, Sunoco shareholders will receive $50 in cash, or 1.0490 Energy Transfer Partner units, or $25 in cash and 0.5245 Energy Transfer Partner units. The third option is worth about $50.13 based on Friday's close, compared with Friday's closing price of $40.91 on the New York Stock Exchange.

Shares of Sunoco rose nearly 20 percent on Monday to $48.98, while Energy Transfer Partners shares rose 3 percent to $49.39.


The planned acquisition comes on the heels of one by Energy Transfer Equity LP, owner of the general partner of Energy Transfer Partners, to buy rival Southern Union Co for $5.5 billion, after a bidding war with Williams Cos Inc.

It also follows Kinder Morgan Inc's more than $20 billion deal for pipeline company El Paso. Deals have become common in the industry due to increasing demand stemming from new shale production as well as the need to fuel growth at master limited partnerships.

MLPs, which pay virtually no corporate tax, distribute most of their profits directly to shareholders and need to grow organically or via acquisition to keep increasing those payouts.

"Any assets that are legally able to be put into an MLP structure will be put into that structure," said Bernard Colson of Global Hunter Securities. "It makes more sense economically and there is a strong trend toward doing that."

After the deal, Sunoco Logistics will continue to trade separately on the New York Stock Exchange.

The companies said the deal would create about $70 million in annual cost savings, about half of which Energy Transfer Partners believes can be realized in 2013.

Sunoco, once a major independent refiner in the Northeastern United States, plans to end nearly 120 years in the refining business as high oil prices and slumping demand squeeze profits.

Sunoco said it would continue talks with private equity firm Carlyle Group LP for a joint venture to run its 335,000-barrel-per-day Philadelphia refinery.

A deal with Carlyle would save the refinery, the biggest on the U.S. East Coast, from a planned closure and ease concerns about potential fuel shortage on the East Coast this summer.

Energy Transfer is also picking up Sunoco's retail business, which operates around 4,900 gas stations in the United States.

Wells Fargo Securities acted as financial adviser to Energy Transfer, while Credit Suisse Securities LLC advised Sunoco.

(Reporting by Mike Erman in New York, Swetha Gopinath in Bangalore and Braden Reddall in San Francisco; Editing by Alden Bentley)

By Swetha Gopinath and Michael Erman

share with twitter share with LinkedIn share with facebook
share via e-mail
Latest news on KINDER MORGAN INC
03/23 HUSKY ENERGY : Canada's Saskatchewan province reviews pipeline rules after Husky..
03/23 KINDER MORGAN : Non-Binding Open Season Announced for the Kinder Morgan Gulf Coa..
03/23 KINDER MORGAN : Open Season for Trans Mountain Expansion Concludes; All Availabl..
03/22 KINDER MORGAN : Non-Binding Open Season Announced for the Kinder Morgan Gulf Coa..
03/22 KINDER MORGAN : Open Season for Trans Mountain Expansion Concludes
03/13 KINDER MORGAN : Trans Mountain Completes Final Cost Estimate Review with Shipper..
03/11 KINDER MORGAN : The Amf Pensionsforsakring Ab Has $41,209,000 Position in Kinder..
03/11DJTAX REPORT : Is a Large Tax Bill Lurking in Your Tax-Free Retirement Account? --..
03/09 KINDER MORGAN : Sells 49% Interest in Elba Liquefaction Company to EIG Global En..
03/09 KINDER MORGAN : raises Canada's Trans Mountain cost, commitments drop
More news
Sector news : Oil & Gas Transportation Services - NEC
03/21 Record outbound Canadian M&A gives foreign banks an upper hand
03/20 TSX falls with oil as energy, high-yielding stocks decline
03/15 TRANSCANADA : M2 to build new crude storage facility in Cushing
03/14 TSX hits 2017 low as energy, Valeant weigh
03/13 TRANSCANADA : Shippers take up Transcanada offer to move natgas on Mainline
More sector news : Oil & Gas Transportation Services - NEC
News from SeekingAlpha
03/23 THE VALUE OF OBJECTIVITY : Four Brief Examples
03/22 Kinder Morgan's New Pipeline Proposal Looks To Profit From Mexican Demand For..
03/22 Kinder Morgan fills Trans Mountain commitments after dip
03/22 Kinder Morgan seeks shippers for Permian gas pipeline project
03/21 Looking At Kinder Morgan's Debt
Financials ($)
Sales 2017 13 519 M
EBIT 2017 4 297 M
Net income 2017 1 538 M
Debt 2017 38 504 M
Yield 2017 2,38%
P/E ratio 2017 26,96
P/E ratio 2018 23,84
EV / Sales 2017 6,31x
EV / Sales 2018 6,10x
Capitalization 46 837 M
More Financials
Duration : Period :
Kinder Morgan Inc Technical Analysis Chart | KMI | US49456B1017 | 4-Traders
Full-screen chart
Technical analysis trends KINDER MORGAN INC
Short TermMid-TermLong Term
Technical analysis
Income Statement Evolution
More Financials
Mean consensus OUTPERFORM
Number of Analysts 22
Average target price 25,6 $
Spread / Average Target 22%
Consensus details
EPS Revisions
More Estimates Revisions
Steven J. Kean President, Chief Executive Officer & Director
Richard D. Kinder Executive Chairman
Kimberly Allen Dang Chief Financial Officer, Director & VP
Mark E. Huse Chief Information Officer & Vice President
C. Park Shaper Director
More about the company
Sector and Competitors
1st jan.Capitalization (M$)
ENBRIDGE INC-3.30%67 554
More Results