Energy Transfer Equity to acquire general partner of Regency Energy Partners

Source: energy Transfer Equity

Dallas-based Energy Transfer Equity, L.P. (ETE), the owner of the general partner of Energy Transfer Partners, L.P. (ETP), has entered into a definitive agreement to acquire the general partner of Regency Energy Partners LP. 

ETE will acquire a 100 percent interest in Regency's general partner from an affiliate of GE Energy Financial Services, a unit of General Electric (NYSE:GE), for approximately $300 million in ETE preferred units. ETE will own the general partner of both ETP and Regency, which will remain separately operated partnerships. 

"We have been actively looking for growth and acquisition opportunities for ETE for some time," said Kelcy Warren, ETE's chairman of the board of directors. "The opportunity to acquire interests in Regency made sense on many levels. Distributions from Regency not only help to diversify ETE, but they also enhance its ability to increase distributions over time by pursuing new growth opportunities at both ETP and Regency. While ETP and Regency will be competitors in the midstream space, they will be run by highly talented management teams that will look for opportunities to work together." 

Under the terms of the transaction agreements, ETP will transfer a 49.9 percent interest in Midcontinent Express Pipeline LLC (MEP) to ETE in exchange for the redemption of 12.3 million ETP units valued at approximately $600 million based on a 10-day weighted average closing price of ETP units as of May 4, 2010. 

ETE will then exchange the interest in MEP with Regency for 26.3 million new Regency common units valued at approximately $600 million based on a 10-day weighted average closing price of Regency units as of May 4, 2010. Following the closing of the transactions, ETE expects to own approximately 22 percent of Regency's outstanding common units and approximately 28 percent of ETP's outstanding common units. ETP will continue to deliver natural gas to MEP through its intrastate pipeline system. Kinder Morgan will retain its 50 percent ownership in MEP.

"This ownership transfer of MEP is tax-efficient to our unitholders, and the value being received is at an attractive multiple. It also allows ETP to forego approximately $86 million in required capital commitments to MEP, and enables ETP to focus its efforts on pursuing attractive capital re-deployment opportunities," said Warren. "ETP plans to retire the common units it will receive from ETE, which will make future growth projects or acquisitions more accretive for our unitholders due to the reduced number of ETP units outstanding and the reduced distribution obligations associated with those units." 

All transactions are expected to be closed within the next 30 days. Financial advisors for this transaction were Credit Suisse Securities (USA) LLC for ETE and RBS Securities Inc. for ETP. Legal counsels were Vinson & Elkins L.L.P. for ETE and Andrews Kurth LLP for ETP.



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