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Natural gas pipeline operator Energy Transfer Partners LP (ETP - Analyst Report) announced that it will buy the remaining 60% stake in ETP Holdco Corp from its general partner Energy Transfer Equity LP (ETE - Snapshot Report), in order to simplify its structure and optimize its portfolio. With this acquisition, Energy Transfer Partners will own ETP Holdco completely.

Per the deal, Energy Transfer Equity will get $1.40 billion in cash and $2.35 billion of Energy Transfer Partners’ newly issued common units. Management expects the transaction to close in the second quarter of 2013, depending upon customary closing conditions.  

ETP Holdco was formed in 2012, by Energy Transfer Partners and Energy Transfer Equity. ETP Holdco holds full control over Southern Union Company and Sunoco Inc, both of which are pipeline operators.

Dallas, TX-based Energy Transfer Partners is a master limited partnership (MLP) engaged primarily in the gathering, processing, storage and transportation of natural gas. Additionally, the partnership holds a 70% stake in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids (NGL) storage, fractionation and transportation assets in Texas, Louisiana and Mississippi.  

We believe Energy Transfer Partners is well positioned to compete in the natural gas midstream and transportation & storage businesses with its geographically-dispersed asset mix. The partnership has a significant market presence in each of its operating areas, which are located in the major natural gas-producing regions of the U.S.

However, gathering and processing MLPs such as Energy Transfer Partners, are more sensitive to commodity prices compared to other MLP subgroups. As a result, collapsing energy prices have adversely affected their cash flow stability.

Energy Transfer Partners currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

In the energy sector, Helmerich & Payne Inc (HP - Analyst Report) and Range Resources Corporation (RRC - Analyst Report) display better fundamentals and currently carry a Zacks Rank #1 (Strong Buy).

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