Energy Transfer to acquire Crestwood Equity Partners in $7.1bn deal

Energy Transfer LP (NYSE: ET) is set to acquire Houston-based Crestwood Equity Partners LP (NYSE: CEQP) in an all-equity deal worth an estimated $7.1 billion. The agreement encompasses the assumption of about $3.3 billion of Crestwood Equity Partners’ debt as of the closing price dated August 15, 2023.

Upon successful completion of the transaction, Crestwood Equity Partners’ common unit holders will be eligible to receive 2.07 Energy Transfer common units for each of their Crestwood Equity Partners units. Expected to finalize by the end of 2023’s fourth quarter, the merger is contingent upon Crestwood Equity Partners’ unit holder approval, regulatory sanctions, and other typical closing stipulations. Following the merger, Crestwood Equity Partners unit holders will own roughly 6.5% of Energy Transfer’s outstanding common units.

Energy Transfer LP, having a vast portfolio spanning across 41 states, is a major player in the U.S. energy sector. Likewise, Crestwood Equity Partners LP is a renowned master limited partnership, boasting an array of midstream businesses in multiple shale resource plays across the U.S.

With a wide array of assets, Crestwood Equity Partners’ system boasts gathering and processing amenities in the Williston, Delaware, and Powder River basins. These assets not only enhance Energy Transfer’s reach into these basins but also align with its downstream capabilities at Mont Belvieu and its hydrocarbon export prowess at the Nederland and Marcus Hook terminals in Texas and Pennsylvania, respectively.

From a business standpoint, the deal promises to fortify Energy Transfer’s Crude Oil and NGL & Refined Products sectors with strategically placed storage and terminal assets, underpinned by long-term contracts and significant acreage dedications from primarily investment-grade producer clientele.

Structured as a 100% unit-for-unit exchange, this merger offers tax efficiency and positions both entities for long-term value augmentation. It promises immediate accretion to distributable cash flow per unit for Energy Transfer, while maintaining neutrality regarding its leverage metrics. Moreover, a projected $40 million of annual cost synergies is anticipated, excluding other financial benefits.

The transaction empowers Crestwood Equity Partners unit holders with potential distribution per unit benefits, while also allowing them to capitalize on Energy Transfer’s forecasted 3-5% annual distribution per unit growth rate.

BofA Securities is Energy Transfer’s sole financial consultant, with Kirkland & Ellis LLP providing legal advice. Conversely, Crestwood Equity Partners has enlisted Intrepid Partners, LLC, and Evercore for financial counsel, with Vinson & Elkins LLP offering legal guidance.