Sunoco LP and pipeline operator NuStar Energy LP said Monday they have agreed to combine in an all-stock deal valued at about $7.3 billion, including debt.
Under the terms of the deal, NuStar
NS,
common unitholders will receive 0.400 Sunoco shares for each unit owned, equal to a 24% premium based on the 30-day volume-weighted average prices of NuStar and Sunoco
SUN,
as of Jan. 19.
Sunoco has secured a $1.6 billion 364-day bridge term loan to refinance NuStar’s Series A, B and C preferred units, subordinated notes, revolving credit facility, and receivables financing agreement, the companies said in a joint statement.
Sunoco is a master limited partnership with operations that include distributing motor fuel to about 10,000 convenience stores and others in 40 U.S. states. NuStar is an independent liquids terminal and pipeline operator. Its stock soared 22% premarket on the news.
The boards-approved deal is expected to close in the second quarter and to immediately boost distributable cash flow per LP unit by more than 10% by the third year following the close.
It’s expected to generate at least $150 million of run-rate synergies in the same time frame and to add about $50 million a year of cash flow by refinancing high-cost floating-rate capital.
See also: 7-Eleven buys 204 stores in West Texas, New Mexico, and Oklahoma from Sunoco for $1B
The deal “continues Sunoco’s successful capital allocation strategy on a larger scale, improving the Partnership’s credit profile, and supporting a growing distribution,” the statement said.
The companies will host a conference call at 10:00 a.m. ET to discuss the deal.
Sunoco’s stock was down 2.5% premarket but has gained 30% in the last 12 months, while the S&P 500
SPX
has gained 21.8%.
