Sunoco has agreed to acquire NuStar Energy, a liquids terminal and pipeline operator in the US and Mexico, in an all-stock deal worth around $7.3bn, inclusive of the latter’s debt.

NuStar Energy, a company listed on the New York Stock Exchange (NYSE), operates a network of around 15,288km of pipelines and 63 terminal and storage facilities. These facilities are utilised for storing and distributing various substances, including crude oil, refined products, renewable fuels, ammonia, and speciality liquids.

The master limited partnership has a storage capacity of approximately 49 million barrels.

Sunoco, which is also listed on the NYSE, functions as a master limited partnership. Its primary operations involve the distribution of motor fuel across more than 40 states and territories in the US.

Additionally, Sunoco is engaged in refined product transportation and terminalling activities. Its general partner is under the ownership of Energy Transfer.

According to Sunoco, the acquisition is geared towards diversifying its business, increasing scale, and leveraging the advantages of vertical integration through the amalgamation of two stable businesses.

Moreover, the move is expected to facilitate greater cash flow generation, enabling reinvestment and fostering growth within an expanded opportunity set.

As per the terms of the deal, each of NuStar Energy’s shares will be exchanged for 0.4 Sunoco’s shares. The ratio implies a 24% premium, determined based on the 30-day volume-weighted average prices (VWAPs) of both firms as of 19 January 2024.

The board of directors of both companies has unanimously approved the transaction.

The closing of the deal is anticipated in Q2 2024, subject to the fulfilment of closing conditions. These conditions include the approval of NuStar Energy’s unitholders and the customary regulatory approvals.

Sunoco was exclusively advised by Truist Securities for the deal, with committed financing provided by both Truist and Bank of America. Legal guidance for the company was provided by Weil, Gotshal & Manges and Vinson & Elkins.

On the other side, NuStar Energy received exclusive financial advisory services from Barclays. Legal counsel for the firm was provided by Wachtell, Lipton, Rosen & Katz and Sidley Austin.

Earlier this month, Sunoco reached an agreement with 7-Eleven to sell 204 convenience stores located in in West Texas, New Mexico, and Oklahoma for an estimated price of $1bn.