Regency Energy completes acquisition of Southern Union Gathering for $1.5bn

US-based Regency Energy Partners has completed the acquisition of Southern Union Gathering Company from Southern Union Company for about $1.5bn.

Southern Union Gathering Company is the owner of Southern Union Gas Services (SUGS), while Southern Union Company is an affiliate of Energy Transfer Equity (ETE) and Energy Transfer Partners.

SUGS’s assets comprises 5,600-mile gathering system and about 500 million cubic feet per day of processing and treating facilities in west Texas and New Mexico for natural gas and natural gas liquids.

The acquired assets will increase Regency Energy’s presence in the liquids-rich Permian Basin in North America.

Regency Energy has financed the acquisition, issuing about 31.4 million new Regency common units and about 6.3 million of newly created Class F common units to Southern Union Company.

The company has funded a $600m cash consideration, less $107m of estimated closing adjustments, by issuing senior notes on 30 April, 2013. The amount is subject to customary post-closing adjustments.

Regency Energy Partners president and CEO, Mike Bradley, said the SUGS assets strategically suit the company.

"We expect the combination of the Regency and SUGS assets to create significant synergies and expand our organic growth opportunities," Bradley added.

"The increased size and scale will also help improve our ability to serve producers in the Permian Basin."

ETE has agreed to give-up the incentive distribution rights payments associated with the new common units, as well as eliminate a $10m annual management fee due from Regency Energy under a services agreement for two years post-closing.

In June 2011, ETE entered into a definitive merger agreement to acquire Southern Union for a total value of $7.9bn.

---

Image: Map of Texas highlighting the Permian Basin. Photo: Courtesy of Patricknoddy.