Sunoco LP and NuStar Energy L.P. have announced 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. These are the details.
Deal Details
Under the terms of the deal, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24% premium based on the 30-day VWAP’s of NuStar and Sunoco as of January 19, 2024. 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 deal has been unanimously approved by the board of directors of both companies and 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.
Strategic Rationale
– Diversifies business, adds scale and captures benefits of vertical integration by combining two stable businesses
– Continues Sunoco’s successful capital allocation strategy on a larger scale, improving the Partnership’s credit profile and supporting a growing distribution
– More cash flow generation for reinvestment and growth across an expanded opportunity set
Positive Financial Outlook
– Immediately accretive with 10%+ accretion to distributable cash flow per LP unit by the third year following close
– At least $150 million of run-rate synergies by the third year following close
– Approximately $50 million per year of additional cash flow from refinancing high-cost floating rate capital
– Will achieve leverage target of 4.0x within 12-18 months post close
– Supports continued distribution growth while maintaining strong coverage
Before closing, NuStar will make a cash distribution of $0.212 per common unit to its common unitholders.
Advisors
Truist Securities served as the exclusive financial advisor to Sunoco. Truist and Bank of America provided committed financing. Weil, Gotshal & Manges LLP and Vinson & Elkins LLP acted as Sunoco’s legal advisors.
Barclays served as the exclusive financial advisor to NuStar. Wachtell, Lipton, Rosen & Katz and Sidley Austin LLP acted as NuStar’s legal advisors.
