Pipeline operator Energy Transfer Partners LP said it will buy Sunoco Inc. for $5.3-billion in stock and cash as part of its plan to focus on transporting more crude oil and refined products amid falling natural gas prices.
Oil and gas production from shale formations in the United States has surged over the past two years creating a scramble to build infrastructure to get supplies to refining hubs.
Meanwhile, oversupply of natural gas has sent prices for the fuel spiralling down to the lowest in a decade and made drilling in so-called "dry gas" fields uneconomical.
"As we have said in the past year, our goal is to derive more of our distributable cash flow from the transportation of heavier hydrocarbons like crude oil, NGLs, and refined products," said Energy Transfer's chief executive officer Kelcy Warren.
Sunoco shareholders will receive $25 in cash and 0.5245 Energy Transfer units, or $50.13, for every share they own.
The offer represents a 22.5-per-cent premium to Sunoco's Friday close of $40.91 on the New York Stock Exchange.
Energy Transfer said the deal, which will immediately add to its distributable cash flow, will change the cash flow mix of its pipeline businesses to about 70 per cent natural gas and 30 per cent liquids.
Energy Transfer said it will also gain distribution rights in Sunoco Logistics Partners , Sunoco's 32.4-per-cent interest in Sunoco Logistics Partners' limited partner units and Sunoco's branded retail business.