uploads///ETP RGP Merger

Energy Transfer acquires Regency Energy Partners for $18 billion

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Nov. 20 2020, Updated 1:25 p.m. ET

Giant acquisition

On January 26, 2015, Energy Transfer Partners (ETP), one of the largest midstream energy companies in the US, announced its intent to acquire Regency Energy Partners LP (RGP), another midstream operator. The transaction is expected to close in 2Q 2015.

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Financial terms

Energy Transfer Partners (ETP) agreed to acquire Regency Energy Partners (RGP) in a unit-for-unit transaction, plus a one-time cash payment. The total consideration of the transaction is $18.0 billion. Included in the implied transaction value was $6.8 billion net debt. Net debt is total debt less cash.

As noted in the chart above, the unit-for-unit and cash transaction value for each Regency Energy unit (RGP) is estimated to be $26.89 based on Energy Transfer Partners’ (ETP) price on January 23. This implies a 13% premium for each RGP unit based on market price.

So, what did the market have to say about the merger announcement?

RGP and ETP units go different ways

On January 26, Energy Transfer Partners’ (ETP) unit price lost ~6.4%. Regency Energy Partners’ (RGP) unit price, meanwhile, gained ~5% to finish at $24.93.

ETP and RGP are both components of the Alerian MLP ETF (AMLP)—7.5% and 8.5%, respectively. Other energy MLPs that are part of AMLP include Enterprise Products Partners (EPD) and Williams Partners (WPZ).

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Lower incentive distribution rights

Energy Transfer Equity (ETE) owns the general partners and 100% of incentive distribution rights, or IDRs, of ETP and RGP. ETE plans to reduce incentive distributions from ETP by $320 million over the next five years—$80 million in the first year and $60 million in each of the subsequent four years. For more on IDRs, read MLP basics.

Recent acquisitions by ETP and RGP

Energy Transfer Partners and Regency Energy Partners have been active recently on the merger and acquisition front. In April 2014, ETP acquired Susser Holdings for $1.8 billion. Susser became a part of Sunoco Logistics Partners (SXL), a subsidiary of ETP. Regency Energy Partners (RGP) acquired PVR Partners for $5.6 billion in stock in March 2014.

In the following part of this series, you’ll learn more about Regency Energy Partners’ (RGP) assets and why Energy Transfer Partners (ETP) acquired the company.

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