Energy Transfer completes $4.9 billion Sunoco deal

Sunoco Inc. is now a subsidiary of Energy Transfer Partners L.P.

ETP, a pipeline company based in Dallas, Texas, on Friday completed its acquisition of the Philadelphia fuel retailer, creating a diversified energy partnership.

For customers of Sunoco and its pipeline subsidiary, Sunoco Logistics Partners L.P., the acquisition should be seamless. Those operations are still based in Philadelphia. Sunoco stations still bear the iconic diamond-and-arrow logo.

But for owners of 104.7 million shares of Sunoco common stock, who approved the merger on Thursday, the transaction is a little more complicated.

Though the deal was valued at $50 a share, or $5.3 billion, when it was announced in April, the value of ETP units has declined in recent months. The actual value of the deal at settlement was closer to $4.9 billion, based upon ETP's closing price Thursday.

ETP had allowed shareholders to choose whether they wanted to receive the proceeds of the sale as cash or ETP units. Most opted for cash. But the terms allowed for only $2.6 billion to be paid in cash, so most shareholders will receive both cash and ETP units.

Owners of 4 percent of Sunoco shares elected to take only ETP units.

Many market watchers had expected ETP's units to decline Friday on the New York Stock Exchange from pressure by Sunoco shareholders seeking to unload their new ETP units.

But ETP units closed at $43.59, up $1.97, or 4.7 percent. About 8.5 million units changed hands, or six times normal volume.

The tax implications for the sale could be profound for Sunoco shareholders.

For federal income-tax purposes, Sunoco shareholders will generally recognize a gain or loss on the cash portion they received. But the exchange of ETP shares for Sunoco shares is a tax-free event. Shareholders only report a gain or loss when they sell the ETP units.

Ownership of the ETP units may be a new experience for Sunoco shareholders. ETP is a master limited partnership, not a corporation. Its publicly traded securities are actually partnership units, whose distributions are taxed and reported to the government differently than common stock dividends.

ETP also took on about $965 million of outstanding Sunoco debt as part of the sale.

Sunoco Inc. will be held inside an ETP holding company, and its primary business will be the retail marketing of fuels and merchandise through Sunoco's 4,900 gas stations and convenience stores.

The ownership of Sunoco Logistics, which operates a network of pipelines and storage terminals, will be held directly by ETP. Sunoco Logistics is currently building a new pipeline, called Mariner East, to transport liquid by-products of Marcellus Shale natural gas to Marcus Hook, the site of a former Sunoco refinery, where the fuels will be processed, stored and shipped by sea.