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Analyst Expects Energy Transfer's Deal To Acquire PennTex Will Close

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Analyst Expects Energy Transfer's Deal To Acquire PennTex Will Close

Energy Transfer Partners LP (NYSE: ETP)'s proposed transaction in which it will acquire the remaining outstanding LP common units of Penntex Midstream Partners LP (NASDAQ: PTXP) is expected to close, at least according to Baird's Ethan Bellamy.

As noted by Bellamy, Energy Transfer Partners already owns 32.4 percent of the outstanding LP units, or a 65-percent interest including subordinated units along with 100 percent of PennTex's general partner and incentive distribution rights.

Energy Transfer only needs to acquire another 47.6 percent of PennTex's unit, after which it will own 80 percent — is enough to exercise its limited call right to buy the remaining units.

According to the analyst, the transaction would combine PennTex's "compelling" exposure to Range Resources' Terryville platform under the Energy Transfer umbrella. Moreover, the timing and pricing of the transaction is consistent with what the analyst was expecting and a slight premium to his $19 per unit valuation for PennTex's unit.

Long-Term Game Plan

Looking forward, Bellamy expects "minimal" regulatory hurdles for the deal to proceed, and the transaction will "likely close" under the currently proposed terms.

Finally, Bellamy thinks the transaction is part of a move by the Energy Transfer family to simplify its business and the next "obvious" move is to roll up Sunoco LP (NYSE: SUN) in the first half of 2018 after the 7-Eleven transaction closes. After that the analyst expects consolidation of all Energy Transfer partnerships into Energy Transfer Equity LP (NYSE: ETE) over the next several years.

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