Energy Transfer Equity, the Texas-based pipeline master limited partnership, said it will acquire Southern Union for $4.2 billion, creating one of the largest U.S. natural gas pipeline operator. Energy Transfer will also assume $3.7 billion in Southern Union debt.
Energy Transfer will pay $33 a share for Texas-based Southern Union (SUG), a 17% premium to where the stock closed on Wednesday. Energy Transfer (ETE) said distributable cash flow, a key metric of the partnership's ability to pay dividends, will increase as a result of the deal.
The combined company would have more than 44,000 miles of natural gas pipelines and about 30.7 billion cubic feet per day of natural gas transportation capacity, according to the Associated Press. The acquisition is the largest purchase of a pipeline company this year, according to data compiled by Bloomberg.
The acquisition is the second large purchase for Energy Transfer in the past three months. In March, the company paid $1.93 billion to acquire LDH Energy Asset Holdings. The deal for Southern Union is expected to close in the first quarter of 2012.