Sunoco to Buy NuStar in $7.3B Deal
This article was first published on Rigzone here
Sunoco LP and NuStar Energy L.P. announced, in a joint statement, that the parties have entered into a definitive agreement whereby Sunoco will acquire NuStar in an all-equity transaction valued at approximately $7.3 billion, including assumed debt.
Under the terms of the deal, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24 percent premium based on the 30-day VWAP’s of both NuStar and Sunoco as of January 19, 2024, the statement noted.
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 statement said, adding that the transaction has been unanimously approved by the board of directors of both companies. It is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unitholders and customary regulatory approvals, the statement highlighted.
Focusing on the strategic rationale of the deal, the statement outlined that the agreement increases stability by diversifying business, adding scale, and capturing the “benefits of vertical integration by combining two stable businesses”.
It also strengthens the financial foundation, according to the statement, which pointed out that it “continues Sunoco’s successful capital allocation strategy on a larger scale, improving the partnership's credit profile, and supporting a growing distribution”. The statement also outlined that the deal enhances growth.
The statement revealed that the deal is immediately accretive with more than 10 percent accretion to distributable cash flow per LP unit by the third year following close and pointed out that it will lead to at least $150 million of run-rate synergies by the third year following close.
Earlier this month, Sunoco announced that it had entered into a definitive agreement for the sale of 204 convenience stores to 7-Eleven, Inc. for approximately $1.0 billion. The company also announced its intention to acquire liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy.
The 204 convenience stores are located in West Texas, New Mexico, and Oklahoma, Sunoco revealed in the announcement. As part of the sale, the company said it will also amend its existing take or pay fuel supply agreement with 7-Eleven to incorporate additional fuel gross profit.
“Proceeds from the sale will allow Sunoco to materially reduce leverage to execute on future growth opportunities while maintaining a strong balance sheet and multi-year distribution growth,” the company said in the announcement.
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“The transaction is expected to close promptly upon receipt of regulatory approvals and satisfaction of customary closing conditions,” it added.
Sunoco revealed in the statement that it intends to buy one hundred percent of the equity interest in Zenith Energy Netherlands Amsterdam B.V., which includes liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland.
The definitive purchase agreement will be executed, and the purchase price announced, after completion of the appropriate Dutch works council consultation and information processes, which are currently underway, Sunoco noted in the announcement.
“The Amsterdam terminal is strategically located in the Port of Amsterdam, which serves as an international hub for the global energy market and is part of the largest refined product trading port in Europe,” it added.
“The Bantry Bay terminal is the largest independent bulk liquids storage terminal in Ireland and provides storage for Ireland's strategic oil reserve. The acquisition will provide supply optimization for Sunoco’s existing East Coast business and continues Sunoco’s focus on growing its portfolio of stable midstream income,” it continued.
“Sunoco expects this tuck-in acquisition to be accretive to unitholders in the first year of ownership and will be funded using amounts available under Sunoco’s revolving credit facility. The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions,” it went on to state.
Sunoco describes itself as a master limited partnership with core operations that include the distribution of motor fuel to approximately 10,000 convenience stores, independent dealers, commercial customers, and distributors located in more than 40 U.S. states and territories, as well as refined product transportation and terminalling assets. Sunoco’s general partner is owned by Energy Transfer LP.
NuStar describes itself as an independent liquids terminal and pipeline operator. It currently has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia, and specialty liquids, according to its site, which notes that the partnership’s combined system has approximately 49 million barrels of storage capacity. The company has operations in the U.S. and Mexico.
To contact the author, email andreas.exarheas@rigzone.com
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