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Energy Transfer and Regency Energy to merge in $18 billion deal

Staff writer |
Energy Transfer Partners, L.P. and Regency Energy Partners LP announced they have entered into a definitive merger agreement. This merger will be a unit-for-unit transaction, plus a one-time cash payment to Regency unit holders.

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That collectively implies a value for Regency of approximately $18 billion, including the assumption of net debt and other liabilities of $6.8 billion. The transaction is expected to close in the second quarter of 2015.

Under the terms of the merger agreement, which has been approved by the boards and conflicts committees of both ETP and Regency, the unitholders of Regency will receive 0.4066 ETP common units and a cash payment of $0.32 for each common unit of Regency, implying an all-in price for Regency common units of $26.89 per unit based on ETP’s closing price on January 23, 2015.

The consideration to be received by Regency common unitholders represents an approximately 13% premium to the closing price of Regency’s common units of $23.75 on January 23, 2015, and an approximately 15% premium to the volume weighted average price of Regency’s common units for the last 3 trading days ending January 23, 2015.

In addition, Energy Transfer Equity, L.P. (NYSE: ETE), which owns the general partner and 100% of the incentive distribution rights (IDRs) of both Regency and ETP, has agreed to reduce the incentive distributions it receives from ETP by a total of $320 million over a five year period. The IDR subsidy will be $80 million in the first year post closing and $60 million per year for the following four years.

The proposed merger has been discussed with the ratings agencies and it is anticipated that the merger will have no impact to ETP’s credit ratings and that Regency’s ratings will be put on review for upgrade.

Pro forma for the merger, ETP will be the second largest MLP and will be well diversified both geographically, with operations in substantially all major producing areas in the United States, and across business lines, with a unique franchise across the energy midstream value chain.


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