DALLAS, Feb 27, 2013 (BUSINESS WIRE) -- Regency Energy Partners LP (NYSE: RGP) today announced it will acquire Southern Union Gathering Company, LLC, the owner of Southern Union Gas Services, Ltd. (SUGS), from Southern Union Company, a jointly owned affiliate of Energy Transfer Equity, L.P. (NYSE:ETE) and Energy Transfer Partners, L.P. (NYSE:ETP). The $1.5 billion acquisition will significantly expand Regency's presence in one of the most productive oil and liquids-rich basins in North America, the Permian Basin.
The acquisition is expected to close in the second quarter of 2013, subject to approval under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.
The transaction will include the purchase of a 5,600-mile gathering system and approximately 500 MMcf/d of processing and treating facilities in west Texas and New Mexico for natural gas and natural gas liquids. In addition, SUGS is currently finishing construction of the 200 MMcf/d Red Bluff processing plant with associated treating which is expected to be in service in the second quarter of 2013. An additional 200 MMcf/d cryogenic processing facility with associated treating is in the planning stages and is expected to be in service in mid-to-late 2014.
"This acquisition represents a significant growth opportunity for Regency and is very strategic to our plans for expansion in the Permian Basin," said Mike Bradley, president and chief executive officer of Regency Energy Partners.
"The integration of the SUGS assets with our existing operations will position Regency with a broad Permian Basin gathering and processing footprint. The combined system is expected to provide significant
synergies, increase efficiencies on our current system, improve the flexibility of our gathering and processing operations and enhance services for our customers."
"We also expect this acquisition will be neutral to slightly accretive in 2013 and to enhance our outlook for long-term distribution growth," continued Bradley.
Regency will finance the acquisition by issuing $900 million of new Regency units to Southern Union Company, comprised of $750 million of new common units and $150 million of new Class F common units. The Class F common units will be equivalent to common units except will not receive distributions for the
equivalent of eight consecutive quarters post-closing. The remaining $600 million will be paid in cash funded from long-term borrowings.
In addition, in conjunction with the transaction, ETE, which owns the general partner and incentive distribution rights of Regency, has agreed to forgo the incentive distribution rights payments associated with the new common units issued by Regency for the equivalent of eight consecutive quarters post-closing and to eliminate the $10 million annual management fee due from Regency for two years post-closing.