Southern Union Company - subsidiary of
Energy Transfer Partners, L.P.
Energy Transfer Equity, L.P.
) - has entered into an agreement to sell its Southern Union
Gathering Company, LLC to
Regency Energy Partners LP
). The divestiture will fetch Southern Union $1.5 billion.
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Per the deal, Regency Energy will have the ownership of the
5,600-mile gathering system in West Texas and New Mexico, and 500
million cubic feet per day of processing and treating facilities.
Southern Union will receive the deal price in 3 parts - $750
million of newly issued Regency common units, $150 million of new
Class F units, and $600 million in cash.
Energy Transfer Equity will give up all incentive distribution
right (IDR) payments from Regency on its newly issued units for
the first 8 successive quarters after the closure of the
transaction. Energy Transfer Partners will also forego the $10
million yearly management fee paid by Regency for the same time
phase. Additionally, the Class F units will not receive any cash
distribution for the same 8 quarters.
It is expected that the deal will close in the second quarter of
2013 after getting an approval under the Hart-Scott-Rodino
Antitrust Improvements Act and other customary closing
We believe that this deal will help Energy Transfer to simplify
and optimize its asset mix.
Earlier this month, Energy Transfer Partners posted strong fourth
quarter results with a profit of 62 cents per limited partner
unit. The performance was aided by a robust performance by the
Interstate Transportation and Storage business unit along with
Sunoco Logistics Partners L.P.
Both, Energy Transfer Partners and Energy Transfer Equity
currently retain a Zacks Rank #3 (Hold), implying an in line
performance with the broader U.S. equity market over the next 1
to 3 months.