Sunoco Logistics Partners (SXL) said on Monday that it will acquire Energy Transfer Partners (ETP) in a unit-for-unit transaction worth over $20 billion.
Sunoco said the transaction has been approved by the boards of directors and conflicts committees of both firms.
The deal is expected to close in the first quarter of 2017, subject to receipt of ETP unitholder approval and other customary closing conditions.
Under the terms of the transaction, ETP unitholders will receive 1.5 common units of SXL for each common unit of ETP they own.
That exchange equates to a 10 percent premium to the volume weighted average pricing of ETP’s common units for the last 30 trading days immediately prior to the announcement of the transaction.
According to the Wall Street Journal, the unit-for-unit transaction is worth about $21 billion.
Sunoco said the existing incentive distribution rights provisions in the SXL partnership agreement will continue to be in effect.
Energy Transfer Equity will own the incentive distribution rights of SXL following the closing of the transaction.
As part of the transaction, ETE has agreed to continue to provide all the incentive distribution right subsidies that are currently in effect for both partnerships.
Sunoco said the transaction is expected to provide significant benefits for SXL and ETP unitholders as the combined partnership “will have increased scale and diversification across multiple producing basins and will have greater opportunities to more closely integrate SXL’s natural gas liquids business with ETP’s natural gas gathering, processing and transportation business.”
SXL and ETP expect that the transaction will produce commercial synergies and costs savings in excess of $200 million annually by 2019.
The combined partnership is expected to be the second largest master limited partnership as measured by enterprise value.
Once the transaction is closed, Energy Transfer chairman and CEO Kelcy Warren will serve as chief executive officer of the firm.
Mackie McCrea will serve as chief commercial officer, Matt Ramsey will serve as president and Tom Long will serve as chief financial officer.
Mike Hennigan and other members of the SXL management team will continue in leading management roles of the combined company with the SXL business headquartered in Philadelphia.