ETp is almost certainly going to issue more shares to help pay for SUN. So do you wait for the discount you will get on the secondary or hope that the new offering price will be above the current $49+. the second problem is that management seems to be pretty cool about running the retail piece of SUN. If they can sell it it might take a big bite out of what they would need to raise in new equity. Wish I knew. Since I don't have a clue, I am going to hold as things unfold - althought I will probably buy more if the secondary is attractive enough.
I like the deal. Management is focused on increasing the distribution but is having a little problem making that happen. They are clearly not comfortable running a retail operation but need to figure it out or find a buyer. From a financing standpoint, I agree that even without more equity their debt/equity ratio improves - but not by as much as some would suggest. Maybe they won't do another secondary for a few months but it is coming for sure.
The Citi report mentions EEP/ENB, MPC, PAA and TRP as companies who are already in the pipeline business and have the balance sheet capacity to consumate a deal. They also mention MMP, OKE and VLO as less likely players. Citi's target is $55. Morgan Stanley also mentions the possibility of a competing bid. They note the breakup fee as a disincentive, but also mention the number of competing bids in similar sales in the last two years. I purchased a lot of Sun when the deal was announced. Let the bidding begin.
Seems to me that ETE/ETP made a great buy if it's over with. Citigroup had just put a 12 month $51 target on SUN prior to the deal. Could be a replay of the SUG deal. In that deal, I owned WMB and ETE and just wanted the bidding to stop.
Who else would interested?
ONE:They are issuing shares to SUN holders for about 50% of the deal price so no Secondary necessary.TWO they MUST sell Retail as those assets do not qualify for MLP ownership....Hope this helps.
Why don't they qualify? GLP is an MLP which has a chain of retail gas stations.
I think they should sell it but so far as I know they don't have to. Similarly all the propane MLPs have retail distribution.
Been a long time since my last accounting course. I think that ETP will assume the debt of SUN as well as acquire their assets. Issuing shares doesn't raise cash so that leaves the debt on the books. I like the acquisition but given my rudimentary knowledge of accounting, it looks like they are going to have to reduce their debt/equity ratio
Or you buy ETE, which will have a higher growth profile, $3.20+ distribution in '14, at a 4% yield is $80. Good chance ETE will end up in ETP eventually and you get a bump there also. If the infrastructure boom doesn't crater, $60 oil would do it, seems this could be great growth story over the next few years. I own both but wish I had just bought ETE. ETP probably gets to $75 while ETE hits $80.