August 15, 2022

DealBook: Energy Transfer to Buy Southern Union for $4.2 Billion

Southern Union Company's Trunkline liquid natural gas terminal in Lake Charles, La.Panhandle Energy/Associated PressSouthern Union Company’s Trunkline liquid natural gas terminal in Lake Charles, La.

Energy Transfer Equity announced on Thursday that it would buy the Southern Union Company for about $4.2 billion in stock, in a deal that will create one of the country’s biggest natural gas pipeline companies.

Under the terms of the acquisition, Energy Transfer will issue special new stock units worth $33 apiece for each share of Southern Union. After the deal closes, those units, which will pay at least an 8.25 percent annualized yield, can be exchanged for either cash or 0.77 Energy Transfer common units.

That is a nearly 17 percent premium to Southern Union’s closing price on Wednesday.

Energy Transfer will also assume about $3.7 billion of Southern Union’s debt.

The merger is the latest among energy companies, which have sought to consolidate over the last year in an effort to gain greater scale.

With the acquisition of Southern Union, Energy Transfer will expand its holdings to more than 44,000 miles of pipelines, with about 30.7 million cubic feet of natural gas capacity.

Energy Transfer said that the purchase would immediately add to its payouts to stockholders, having identified $100 million in operational cost savings and $25 million in additional one-time savings.

The deal is expected to close in the first quarter next year.

Energy Transfer was advised by Credit Suisse and the law firms Latham Watkins and Bingham McCutchen. Southern Union received advice from Evercore Partners and the law firms Locke Lord Bissell Liddell and Roberts Holland.

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