Regency Energy Partners and Energy Transfer Partners announced on Monday, January 26th that they have signed a merger agreement. This merger will be a share-for-share transaction, plus a one-time cash payment to Regency share holders. The total price places a total value of approximately $18.0 billion on Regency, including the assumption of debt and other liabilities of $6.8 billion.
The transaction is anticipated to finalize by June 2015. Regency shares are up around 12% on the merger news.
Seth Klarman Tells His Investors: Central Banks Are Treating Investors Like “Foolish Children”
"Surreal doesn't even begin to describe this moment," Seth Klarman noted in his second-quarter letter to the Baupost Group investors. Commenting on the market developments over the past six months, the value investor stated that events, which would typically occur over an extended time frame, had been compressed into just a few months. He noted Read More
More consolidation in the pipeline industry
This deal is just the latest M&A activity among pipeline companies, as the sector starts to consolidate for economy of scale. Kelcy Warren is the chairman and CEO of Energy Transfer Partners, as well as chairman and the biggest shareholder of Energy Transfer Equity, which has a majority stake in both Energy Transfer and Regency.
Of note, major pipeline owner Kinder Morgan announced late last year that it was consolidating three partnerships in a $44 billion deal.
“In light of the current volatility in commodity prices and the changes in the capital markets, it became apparent over the last several months that Regency needed more scale and diversification, along with an investment-grade balance sheet, to continue its growth,” Mike Bradley, the CEO of Regency Partners, noted in a statement.
More on the Regency Energy – Energy Transfer Partners merger
According to the statement, the Regency Energy deal will allow Energy Transfer “to become a major player in the Marcellus and Utica shales, and believes that pro forma with this merger, it it ideally positioned to achieve that goal in the near term.”
The merger when closed will make Texas-based Energy Transfer the second-largest master-limited partnership, in the sector. An MLP is an organizational structure that allows businesses to pass through most of their earnings to investors without paying federal corporate income tax.
Of interest, Energy Transfer’s holding companies own and operates about 71,000 miles of pipelines that transport natural gas, liquids derived from natural gas, fuel and crude oil across the U.S.