Sunoco LP Completes Acquisition of NuStar Energy L.P.; Announces a 4% Increase in Quarterly Distribution

Rhea-AI Summary

Sunoco LP (NYSE: SUN) has completed the acquisition of NuStar Energy L.P., resulting in a 4% increase in its quarterly distribution. The merger enhances Sunoco's stability, credit profile, and financial foundation, with expected synergies and increased cash flow. The transaction is projected to be immediately accretive to distributable cash flow per LP unit, growing over 10% by the third year. Additionally, the Board of Directors declared a quarterly distribution of $0.8756 per common unit, showing continued confidence in future distribution increases.

Positive

• The acquisition of NuStar strengthens Sunoco's stability, credit profile, and financial foundation.

• Expected synergies of at least $150 million in expense and commercial, along with $50 million per year from refinancing activity, will enhance Sunoco's growth potential.

• The transaction is anticipated to be immediately accretive to distributable cash flow per LP unit and is projected to grow over 10% by the third year.

Negative

• None.

Insights

Financial Analyst

The acquisition of NuStar by Sunoco represents a strategic move to bolster their market position. With the announcement of at least $150 million in synergies, the deal indicates a focus on optimization of operations and cost efficiencies. Additionally, the forecasted $50 million per year in extra cash flow from refinancing activities suggests a solidified balance sheet. The guidance that the transaction would be immediately accretive to distributable cash flow per LP unit, scaling to over 10% by the third year, reflects positively on expected unitholder value. This is further substantiated by the 4% rise in quarterly distribution, a sign of confidence in Sunoco's cash flow stability and growth prospects. However, these projections rely on successful integration and market conditions remaining favorable.

Energy Sector Analyst

This transaction is a significant development within the energy sector, as it signals consolidation in the industry, which could lead to increased pricing power and market share for Sunoco. The cessation of trading of NuStar's common units post-acquisition is a typical procedural outcome, reflecting the finality of the merger. Investors should monitor how Sunoco leverages NuStar's assets to enhance its service offerings and whether it can effectively integrate NuStar's operations to realize the promised synergies. The impact on the competitive landscape is also of interest, as such consolidation can lead to shifts in market dynamics.

Mergers and Acquisitions Expert

From a mergers and acquisitions perspective, the deal's success hinges on meticulous integration and synergy capture. The indicated $150 million in synergies, if realized, would validate the strategic rationale behind the acquisition. However, the actual benefits could differ, as post-merger integrations often encounter unforeseen challenges that could affect timelines and cost savings. Investors should consider the risks associated with integration, such as cultural clashes and system incompatibilities, which could dilute the anticipated financial benefits.

DALLAS, May 3, 2024 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("Sunoco") announced the completion of the acquisition of NuStar Energy L.P. ("NuStar") and a 4% increase in its quarterly distribution.

NuStar Energy Acquisition

Sunoco announced the completion of the acquisition of NuStar. The merger was approved by NuStar unitholders at its Special Meeting held on May 1, 2024. Effective as of the opening of markets on May 3, 2024, NuStar's common units ceased trading on the New York Stock Exchange.

The completion of this transaction increases Sunoco's stability and credit profile, strengthens its financial foundation, and enhances its ability to grow. Sunoco expects to realize at least $150 million of expense and commercial synergies. In addition, Sunoco expects at least $50 million per year of additional cash flow from refinancing activity. Sunoco expects the transaction to be immediately accretive to distributable cash flow per LP unit, growing to greater than 10% accretion by the third year following close.

Quarterly Distribution Increase

Sunoco also announced that the Board of Directors of its general partner declared a quarterly distribution for the first quarter of 2024 of $0.8756 per common unit or $3.5024 per common unit on an annualized basis. The distribution will be paid on May 20, 2024, to common unitholders of record on May 13, 2024 (including the former NuStar unitholders who received Sunoco common units upon the completion of the merger).

Building on the 2% increase last year, this 4% increase demonstrates Sunoco's continued confidence in the business and in future distribution increases.

Sunoco will provide additional details about the NuStar acquisition and distribution increase on Sunoco's first quarter 2024 conference call on May 8, 2024, at 9:00 a.m. Central Daylight Time.

About Sunoco LP

Sunoco LP (NYSE: SUN) is a leading energy infrastructure and fuel distribution master limited partnership operating across 47 U.S. states, Puerto Rico, Europe, and Mexico. The Partnership's midstream operations include an extensive network of approximately 9,500 miles of pipeline and over 100 terminals. This critical infrastructure complements the Partnership's fuel distribution operations, which serve approximately 10,000 convenience stores, independent dealers, commercial customers, and distributors. SUN's general partner is owned by Energy Transfer LP (NYSE: ET).

Qualified Notice

This release serves as qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d). Please note that one hundred percent (100%) of Sunoco LP's distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of Sunoco LP's distributions to foreign investors are subject to federal tax withholding at the highest applicable effective tax rate. Nominees, and not Sunoco LP, are treated as withholding agents responsible for withholding distributions received by them on behalf of foreign investors. For purposes of Treasury Regulation section 1.1446(f)-4(c)(2)(iii), brokers and nominees should treat one hundred percent (100%) of the distributions as being in excess of cumulative net income for purposes of determining the amount to withhold.

Contacts
Investors:
Scott Grischow, Treasurer, Senior Vice President – Finance
(214) 840-5660, scott.grischow@sunoco.com

Media:
Vicki Granado, Vice President – Media & Communications
(214) 981-0761, vicki.granado@energytransfer.com

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SOURCE Sunoco LP

FAQ

What is the quarterly distribution increase announced by Sunoco?

Sunoco announced a 4% increase in its quarterly distribution, with a declaration of $0.8756 per common unit for the first quarter of 2024.

When was the merger with NuStar Energy L.P. completed by Sunoco?

The merger with NuStar Energy L.P. was completed by Sunoco on May 3, 2024.

What is the expected impact of the acquisition on Sunoco's financial performance?

The acquisition is expected to enhance Sunoco's stability, credit profile, and financial foundation, with projected synergies and increased cash flow.