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Energy Transfer LP 8-K Report, Material Agreement (Jul 5, 2011)

Filed July 5, 2011For Securities:ETET-PI

Summary

Energy Transfer Equity, L.P. (ET) announced a significant development on July 4, 2011, with the filing of an Amended and Restated Agreement and Plan of Merger to acquire Southern Union Company (SUG). This amended merger agreement modifies terms from an earlier June 15, 2011 agreement. The acquisition will be structured as a merger where SUG becomes a wholly owned subsidiary of ET, with consideration comprising a mix of cash and ET common units. Key to the transaction is the flexibility offered to SUG shareholders, who can elect to receive either $40.00 per share in cash or 0.903 ET common units per share. However, this election is subject to caps: a minimum of 40% and a maximum of 50% of the aggregate merger consideration will be paid in ET units, with the remainder in cash. If more than 60% of SUG shares opt for cash, the cash component will be reduced, and more units will be issued. Conversely, if more than 50% opt for units, the unit component will be reduced, and more cash will be paid. Additionally, ET secured a $3.273 billion bridge loan facility from Credit Suisse to fund the cash portion of the acquisition. In a related transaction, ET also entered into an agreement to contribute a 50% interest in Citrus Corp. (owner of the Florida Gas Transmission pipeline system) to Energy Transfer Partners, L.P. (ETP) for approximately $1.9 billion in cash and ETP common units. This "Citrus Dropdown" is contingent upon the completion of the Southern Union merger. The filing also notes the termination of consulting and non-competition agreements with key SUG executives and the resignation of two directors from ET's General Partner.

Key Highlights

  • 1Energy Transfer Equity (ET) amended its merger agreement to acquire Southern Union Company (SUG), with the merger expected to close by June 30, 2012 (with potential extensions).
  • 2SUG shareholders will receive a mix of cash ($40.00 per share) and ET common units (0.903 units per share) upon merger completion, with proration mechanisms to ensure 40-50% of the aggregate consideration is in ET units and 50-60% in cash.
  • 3ET secured a $3.273 billion bridge loan facility from Credit Suisse to finance the cash component of the SUG acquisition.
  • 4ET announced a 'Citrus Dropdown' transaction to contribute a 50% interest in Citrus Corp. (owner of Florida Gas Transmission) to ETP for approximately $1.9 billion, contingent on the SUG merger closing.
  • 5Termination agreements were executed with key SUG executives (Lindemann and Herschmann), terminating previous consulting and non-competition agreements.
  • 6Major SUG stockholders, including the Lindemann family, entered into an amended support agreement to vote in favor of the merger and elect to receive equity consideration.
  • 7Bill W. Byrne and Paul E. Glaske resigned as directors of ET's General Partner, effective June 30, 2011.

Frequently Asked Questions

ET, through its subsidiary Merger Sub, will merge with SUG, making SUG a wholly owned subsidiary of ET. SUG shareholders will receive a combination of cash and ET common units. Specifically, shareholders can elect to receive either $40.00 cash or 0.903 ET common units per share, subject to proration limits to ensure that between 40% and 50% of the total merger consideration is paid in ET units and between 50% and 60% is paid in cash.

The merger agreement includes proration mechanisms. If more than 60% of SUG shares elect to receive cash, the cash component for those electing cash will be reduced, and the remainder will be paid in ET units (at a ratio of 0.903 per share). Conversely, if more than 50% of SUG shares elect to receive ET units, the unit component for those electing units will be reduced, and the remainder will be paid in cash ($40.00 per share).

ET has secured a $3.273 billion senior bridge term loan credit facility from Credit Suisse Securities (USA) LLC and Credit Suisse AG to fund the cash consideration required for the merger.

In conjunction with the SUG merger, ET has agreed to contribute a 50% interest in Citrus Corp. (which owns the Florida Gas Transmission pipeline system) to Energy Transfer Partners, L.P. (ETP) for approximately $1.9 billion. This transaction, referred to as the 'Citrus Dropdown,' is contingent on the successful completion of the SUG merger and is expected to enhance accretion for ET.