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Sunoco Logistics Inks Deal to Buy Energy Transfer for $21B

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Sunoco Logistics Partners L.P. has recently entered into a merger agreement to acquire pipeline operator Energy Transfer Partners, L.P. in a unit-for-unit transaction worth $21.3 billion.

Under the terms of the transaction, unitholders of Energy Transfer will receive 1.5 common units of Sunoco for each common unit of Energy Transfer they own.  Post the merger, Dallas-based Energy Transfer Partners will remain the overall parent of the combined entity. The deal is expected to close early next year, subject to approval by shareholders of Energy Transfer, and other customary closing conditions.

This merger is expected to create several commercial synergies, and result in $200 million worth of annual costs savings by 2019. The transaction is also expected to strengthen the financials of the combined organization by making use of cash distribution savings to lower debt and to finance a portion of the growth capital expenditure programs of the combined entity.

Philadelphia-based Sunoco Logistics, a master limited partnership, acquires, owns, and operates a geographically diverse portfolio of refined product and crude oil pipelines and terminal facilities.

Recently, the company along with ExxonMobil Corporation (XOM - Free Report) announced their decision to form a strategic joint venture (“JV”) by combining their key crude oil midstream assets, mainly in the Permian basin of West Texas. Sunoco Logistics will be the majority owner and operator of the JV assets with a stake of 85%, while ExxonMobil will hold the remaining 15%.

SUNOCO LOGISTIC Price

Sunoco Logistics currently carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

A better-ranked player from the broader energy sector includes Braskem S.A. (BAK - Free Report) . The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, Braskem posted an average positive earnings surprise of 105.5%.

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