Streamlines organizational structure and eliminates IDR burden
DALLAS–(BUSINESS WIRE)–Energy Transfer Equity, L.P. (NYSE: ETE) and Energy Transfer Partners, L.P. (NYSE: ETP) today announced that they have entered into a definitive agreement providing for the merger of ETP with a wholly-owned subsidiary of ETE in a unit-for-unit exchange. In connection with the transaction, ETE’s incentive distribution rights (IDRs) in ETP will be cancelled. The transaction, which was approved by the boards of directors and conflicts committees of both partnerships, is expected to close in the fourth quarter of 2018, subject to the approval by a majority of the unaffiliated unitholders of ETP and other customary closing conditions. ETE currently owns the general partner of ETP.
Under the terms of the transaction, ETP unitholders (other than ETE and its subsidiaries) will receive 1.28 common units of ETE for each common unit of ETP they own.
The transaction is expected to provide significant benefits for the partnerships, including:
- providing a premium to the current ETP common unit trading price while being immediately accretive to ETE’s distributable cash flow per unit;
- improving the combined partnership’s equity cost of capital through the elimination of ETE’s IDRs in ETP, which in turn is expected to enhance the combined partnership’s cash accretion from investments in organic growth projects and strategic M&A following the closing of the transaction;
- further aligning the economic interests within the Energy Transfer family;
- simplifying the overall structure, which reduces complexity and improves transparency for investors; and
- increasing cash distribution coverage and retained cash flow, which will allow the combined partnership to reduce its leverage ratio as well as reduce the need for equity issuances to fund organic growth.
The transaction is expected to strengthen the balance sheet of the combined organization by utilizing cash distribution savings to reduce debt and to fund a portion of ETP’s robust growth capital expenditure program. The completion of major capital projects currently in progress is expected to continue to generate strong distributable cash flow growth for the combined partnership following the transaction. The partnerships expect to maintain investment grade credit ratings for the combined partnership.
In connection with the simplification transaction, ETE’s general partner has agreed to waive its existing contractual preemptive right with respect to the issuance of ETE common units in the merger that, if otherwise exercised, would entitle ETE’s general partner to purchase additional ETE common units to maintain its and its affiliates’ percentage ownership interest in ETE. In partial consideration for that waiver, ETE’s general partner will be issued a newly created series of Class A units that will result in ETE’s general partner and its affiliates maintaining the same relative voting interest in ETE that the general partner and its affiliates had prior to the merger.
ETE and ETP will hold a joint conference call to discuss the transaction details on Thursday, August 2, 2018 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time). An investor presentation will be posted to the partnerships’ websites and filed with the SEC on a Form 8-K.
The dial-in number for the call is 877-709-8150 or 201-689-8354. To participate by telephone, please call approximately 15 minutes before the 9:00 a.m. Central Time (10:00 a.m. Eastern Time) start time and ask for the Energy Transfer call. The investor presentation and a live webcast of the call may be accessed on the investor relations page of ETE’s and ETP’s website at www.energytransfer.com. The call will be available for replay for a limited time by dialing 877-660-6853 or 201-612-7415, Conference ID 13682328. A replay of the broadcast will also be available on ETE’s and ETP’s website for a limited time.
A more detailed description of the merger agreement and the terms of the Class A units will be set forth in a Current Report on Form 8-K that ETE expects to file with the Securities and Exchange Commission on August 2, 2018.