Energy Transfer Selling $2.23 Billion in Assets to Sunoco

  • Deal completes $5.7 billion of dropdowns from Energy Transfer
  • Warren simplifying financial structure after buying spree

Energy Transfer Partners LP, a unit of the pipeline group led by billionaire Kelcy Warren, agreed to sell wholesale fuel and retail marketing assets for about $2.23 billion to its affiliate Sunoco LP.

The transaction, which completes $5.7 billion of retail-business dropdowns from Energy Transfer to Sunoco in just over a year, will be effective Jan. 1 and is expected to close in February, the companies said Monday in a statement. Energy Transfer Partners will get $2.2 billion of cash to help fund planned 2016 expansions.

It’s the latest move by Warren’s Energy Transfer Equity LP to simplify the financial structure of its energy partnerships after a buying spree that includes the pending $37.7 billion takeover of Williams Cos. That deal would create the largest transporter of natural gas in the U.S.

“It sounds like a good deal for Energy Transfer Partners,” Michael Kay, a pipeline analyst for Bloomberg Intelligence, said today by phone. He doesn’t rate the stocks and owns none. “They’re doing it now so they’ll have cash for next year and the market is a little uncertain.”

Monday’s transaction comes amid a sell-off in energy stocks that’s seen a 39 percent drop in the value of Energy Transfer Partners and a 33 percent drop in the value of Sunoco this year through Nov. 13. That had raised investor concern that their stakes will be diluted by stock sales to fund expansion in 2016.

Equity Needs

Sunoco said it “doesn’t anticipate” selling equity next year. Cash from Monday’s transaction means Energy Transfer Partners’ remaining equity needs for 2016 will be “modest,” according to the statement.

Sunoco rose 5.6 percent to $34.97 at the close in New York. Energy Transfer Partners rose 4.4 percent to $41.37.

Energy Transfer Partners, primarily an operator of natural gas pipelines and processing units, will shift to an affiliate the balance of marketing businesses acquired in its $6.8 billion acquisition of Sunoco in 2012.

“With the completion of the dropdown program, SUN will be able to focus on a broad range of opportunities to grow via third-party acquisitions and capital projects,” according to the statement.

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