Under the terms of the agreement, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit, implying a 24% premium based on the 30-day VWAP’s of both NuStar and Sunoco as of January 19, 2024. Sunoco has secured a $1.6 billion 364-day bridge term loan to refinance NuStar’s Series A, B and C Preferred Units, Subordinated Notes, Revolving Credit Facility, and Receivables Financing Agreement.
The transaction has been unanimously approved by the board of directors of both companies and is expected to close in the second quarter of 2024 upon the satisfaction of closing conditions, including approval by NuStar’s unitholders and customary regulatory approvals. Prior to closing, NuStar will make a cash distribution of $0.212 per common unit to its common unitholders.
The rationale behind this acquisition is threefold. It increases stability by diversifying Sunoco’s business, adds scale, and captures the benefits of vertical integration by combining two stable businesses. It also continues Sunoco’s successful capital allocation strategy on a larger scale, improving the partnership’s credit profile, and supporting a growing distribution. Finally, the acquisition enhances growth by generating more cash flow for reinvestment and growth across an expanded set of opportunities.
Offering a positive financial outlook for the future, Sunoco is poised to receive the following benefits:
- Accretion: Immediately accretive with 10%+ accretion to distributable cash flow per LP unit by the third year following close
- Synergies: At least $150 million of run-rate synergies by the third year following close
- Financial Savings: Approximately $50 million per year of additional cash flow from refinancing high-cost floating rate capital
- Leverage: Will achieve leverage target of 4.0x within 12-18 months post close
- Distribution Growth: Supports continued distribution growth while maintaining strong coverage
Additional details will be made available today in a presentation on the Investor Relations section of Sunoco’s website, under Webcasts and Presentations and on the Investor section of NuStar’s website.