OREANDA-NEWS. January 29, 2015. Energy Transfer Partners, L.P. (NYSE: ETP) and Regency Energy Partners LP (NYSE: RGP) (“Regency”) today announced they have entered into a definitive merger agreement.

This merger will be a unit-for-unit transaction, plus a one-time cash payment to Regency unit holders, that collectively implies a value for Regency of approximately USD18.0 billion, including the assumption of net debt and other liabilities of USD 6.8 billion. The transaction is expected to close in the second quarter of 2015.

Under the terms of the merger agreement, which has been approved by the Boards of Directors and Conflicts Committees of both ETP and Regency, the unitholders of Regency will receive 0.4066 ETP common units and a cash payment of USD 0.32 for each common unit of Regency, implying an all-in price for Regency common units of USD 26.89 per unit based on ETP’s closing price on January 23, 2015. The consideration to be received by Regency common unitholders represents an approximately 13% premium to the closing price of Regency’s common units of USD 23.75 on January 23, 2015, and an approximately 15% premium to the volume weighted average price of Regency’s common units for the last 3 trading days ending January 23, 2015.

In addition, Energy Transfer Equity, L.P. (NYSE: ETE), which owns the general partner and 100% of the incentive distribution rights (IDRs) of both Regency and ETP, has agreed to reduce the incentive distributions it receives from ETP by a total of USD 320 million over a five year period. The IDR subsidy will be USD 80 million in the first year post closing and USD 60 million per year for the following four years.

The proposed merger has been discussed with the ratings agencies and it is anticipated that the merger will have no impact to ETP’s credit ratings and that Regency’s ratings will be put on review for upgrade.

Pro forma for the merger, ETP will be the second largest MLP and will be well diversified both geographically, with operations in substantially all major producing areas in the United States, and across business lines, with a unique franchise across the energy midstream value chain.

This merger will create substantial cost savings, capital efficiencies and valuable ancillary benefits for both Regency’s and ETP’s unitholders. It will also strengthen the overall growth platform for the combined company.

ETP and Regency expect to capitalize on the full breadth of the combined gathering and processing platforms in several prolific producing regions, including the Permian Basin and Eagle Ford Shale. Among the numerous benefits of this merger is the likelihood of further liquids volume growth for Lone Star, which is ETP and Regency’s NGL joint venture, and also the expected increase in natural gas volumes into ETP’s intrastate pipeline system. The exciting opportunities from this merger include not only the broader midstream footprint in Texas, but also the Marcellus and Utica shale plays in Appalachia, where Regency’s extremely attractive and well-positioned operations and growth projects complement ETP’s Rover interstate gas pipeline (currently under construction), which will create over 3 Bcf/day of natural gas takeaway capacity from these plays. The presence of ETP and Regency in these shales will also be complemented by the significant activity of Sunoco Logistics Partners, L.P, (NYSE: SXL), another member of the Energy Transfer family, as it builds on its asset base in that area. Overall, ETP intends to become a major player in the Marcellus and Utica shales and believes that pro forma this merger, it is ideally positioned to achieve that goal in the near term.

“I am very proud of the entire team at Regency and am honored to have been able to lead some of the finest people in the industry,” said Mike Bradley, Regency’s Chief Executive Officer. “Together, we have built Regency into one of the largest gathering and processing MLPs in the U.S. over the last several years. In light of the current volatility in commodity prices and the changes in the capital markets, it became apparent over the last several months that Regency needed more scale and diversification, along with an investment grade balance sheet, to continue its growth. As a result, the combination with ETP became a logical transaction, as we believe that this merger will create significant immediate and long-term value for our unitholders. The merger will also allow Regency and ETP to consolidate our complementary midstream operations in the Permian and West Texas areas. The ability to bring those operations together under one roof is expected to create tremendous value for the unitholders of the combined partnerships.”