NuStar Energy and Sunoco agree to $7.3B merger, eyeing significant synergies

The transaction is expected to close in the second quarter of 2024

File: Nustar Energy

SAN ANTONIO – San Antonio-based pipeline and terminal operator NuStar Energy LP (NYSE: NS) has agreed to be acquired by Dallas-based fuel distributor Sunoco LP (NYSE: SUN) for $7.3 billion, NuStar announced.

Sunoco will acquire NuStar in an all-stock transaction valued at approximately $7.3 billion, according to the announcement. NuStar shareholders will receive 0.4 Sunoco common units for each NuStar common unit, implying a 24% premium based on the 30-day average trading prices of NuStar and Sunoco as of Jan. 19. Sunoco has also secured a $1.6 million bridge term loan to refinance NuStar’s debt in the transaction.

Joseph Kim, president and chief executive officer of Sunoco, said in an investor call Monday morning that the acquisition will create greater scale and allow Sunoco to diversify and integrate its logistics supply chains, adding that the company expects $150 million in realized synergies by the third year after close.

“This builds from approximately a 5% accretion in the first year, which will benefit from $50 million of savings from refinancing, higher cost equity and debt within the NuStar capital structure,” Kim added.

Kim said the company expects to achieve a debt leverage target of four times in the 12 to 18 months post close.

NuStar Chairman and CEO Brad Barron released the following statement regarding the transaction:

We are excited to announce this transaction and believe the increased size and scale of the combined company will provide increased access to capital while at the same time creating more opportunities for growth. Upon closing of the transaction, the combined company will become the 7th largest MLP in the country.

Additionally, we are pleased that Sunoco shares our commitment to its employees and to the health, safety and environmental culture that is so important to us. Sunoco understands that NuStar’s employees are our number one asset. The acquisition by Sunoco presents a unique opportunity because the companies’ operations are highly complementary and do not overlap.  As a result, Sunoco will need the expertise of our employees to ensure the continued operation of the legacy NuStar assets.

Sunoco is also a good corporate citizen and an important partner in the communities in which they operate. Regarding our headquarters building here in San Antonio, NuStar has a 20-year lease on the building and Sunoco has committed to keeping the building open for two more years.

The transaction is expected to close in the second quarter of 2024, following approval from NuStar’s shareholders and customary regulatory approvals.

Read the full story in the San Antonio Business Journal.

Editor’s note: This story was published through a partnership between KSAT and the San Antonio Business Journal.

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