In a significant move, Sunoco LP and NuStar Energy L.P. have jointly declared a definitive agreement, outlining Sunoco’s acquisition of NuStar in a transformative all-equity transaction valued at an impressive $7.3 billion. Under the terms of the deal, NuStar common unitholders are set to receive 0.400 Sunoco common units for each NuStar common unit, implying a noteworthy 24 percent premium based on the 30-day VWAP’s of both NuStar and Sunoco as of January 19, 2024.
To facilitate this strategic acquisition, Sunoco has secured a robust $1.6 billion 364-day bridge term loan. This financial maneuver is designed to efficiently refinance NuStar’s various financial instruments, including Series A, B, and C Preferred Units, Subordinated Notes, Revolving Credit Facility, and the Receivables Financing Agreement. The boards of directors of both companies have unanimously approved this ambitious transaction, signaling a shared vision for future growth and stability. The closing of the acquisition is projected to take place in the second quarter of 2024, contingent upon obtaining regulatory approvals and fulfilling customary closing conditions.
This landmark agreement holds immense strategic significance, offering a multifaceted approach to growth and stability. The integration of NuStar into Sunoco’s portfolio is expected to enhance stability by diversifying business operations, introducing scalability, and capitalizing on the advantages of vertical integration by combining two fundamentally stable businesses. The deal is poised to strengthen Sunoco’s financial foundation, building on the success of its capital allocation strategy on a larger scale. This strategic move is anticipated to elevate the partnership’s credit profile and provide substantial support for a growing distribution, underlining a commitment to long-term financial health.
A noteworthy aspect of this acquisition is its immediate accretive impact, with more than a 10 percent increase in distributable cash flow per LP unit expected by the third year post-close. Additionally, the deal is anticipated to generate a substantial run-rate of synergies, reaching at least $150 million by the third year following the close. These financial gains underscore the strategic acumen employed in crafting this acquisition, emphasizing both immediate benefits and sustained value creation over the long term.
Sunoco has recently made strategic announcements, further solidifying its market position. The sale of 204 convenience stores to 7-Eleven for around $1.0 billion and the intention to acquire liquid fuels terminals in Amsterdam, Netherlands, and Bantry Bay, Ireland, from Zenith Energy showcase Sunoco’s commitment to a diversified and expansive growth strategy. The Zenith Energy acquisition, expected to conclude in the first quarter of 2024, subject to customary closing conditions, is positioned to bolster Sunoco’s presence in key international energy hubs.
“Proceeds from the sale will allow Sunoco to materially reduce leverage to execute on future growth opportunities while maintaining a strong balance sheet and multi-year distribution growth,” the company said in the announcement.
The acquisition of NuStar by Sunoco represents a pivotal moment in their growth trajectories. It is a strategic move that combines financial strength, operational synergies, and a forward-looking vision for sustained success in the dynamic energy landscape. The successful execution of this transformative acquisition is poised to redefine Sunoco’s position in the market and unlock new avenues for value creation.
