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Sunoco Logistics to merge with parent company

Sunoco Logistics Partners LP, based in Newtown Square, announced Monday that it had agreed to acquire its parent company, Energy Transfer Partners LP, the firm building the hotly contested Dakota Access Pipeline in the Midwest.

The transaction, combining two related companies that are among the nation's largest transporters of oil and natural gas, is more of a merger than an acquisition by Sunoco Logistics, which operates a large terminal in Marcus Hook that is emerging as the region's energy hub.

Though Sunoco Logistics is acquiring Energy Transfer Partners, the new company will be headed by ETP's management team, led by chief executive Kelcy Warren.

The combined companies will be called Energy Transfer Partners, not Sunoco. Though it went unstated, the headquarters seem likely to remain in Dallas, where Warren has deep community roots.

The merger's impact  on Sunoco Logistics' Pennsylvania operations is unclear. Chief executive Michael Hennigan and his management team will remain in Newtown Square and "continue in leading management roles of the combined company," according to a statement.

The pipeline companies operate as master limited partnerships, which are known for paying robust quarterly distribution payments to the owners of their partnership units. The units trade publicly on the New York Stock Exchange, just like stock.

The transaction values ETP at $21.3 billion. Energy Transfer unit-holders will receive 1.5 common units of Sunoco for each unit they own, equal to a 10 percent premium to its average price in the past 30 trading days, according to a statement Monday.

The companies billed the transaction as a "large step" in simplifying the complex family of partnerships that operate under Warren's umbrella company, Energy Transfer Equity.

While the unit prices of Sunoco Logistics closed down 6.5 percent on Monday and ETP units closed down 8.5 percent, the unit price for Energy Transfer Equity moved up 3.7 percent, reflecting investors' greater confidence that the combined companies would produce a more predictable flow of distribution payments.

Company officials told investment analysts that they expect more than $200 million in synergies from the combination and an improved credit profile.

Using Sunoco Logistics as the platform for the combined companies "really positions us for a strong growth profile," Sunoco CEO Hennigan said in a call with investment analysts Monday.

Warren's proposed $33 billion takeover of pipeline operator Williams Cos. fell apart earlier this year. Investors had pressured him to streamline the corporate structure to make it easier to raise capital.

Without the transaction, ETP would need to consider reducing its quarterly distribution by 15 percent to 25 percent to reduce its leverage, the companies said.

In 2012, ETP acquired Sunoco for $5.3 billion. ETP continues to operate Sunoco LP, the business that owns the retail and wholesale fuel operations.

Sunoco Logistics, which operates the crude oil and fuel pipelines, has a strong position in the Marcellus and Utica Shale regions of Appalachia. It is building the Mariner East pipelines to deliver natural-gas liquids like propane and ethane from Western Pennsylvania to its Marcus Hook terminal operation in Delaware County.

ETP is building the 1,200-mile, four-state Dakota Access pipeline to carry oil from North Dakota to a shipping point in Illinois. That pipeline has ignited fierce opposition from the Standing Rock Sioux and others in North Dakota.