Energy Transfer to merge with Regency Energy in $18bn transaction

Energy Transfer Partners (ETP) and Regency Energy Partners have agreed to merge in a $18bn unit for unit transaction.

The merger includes a one-time cash payment to Regency unit holders, including the assumption of net debt and other liabilities of $6.8bn.

The transaction, which is subject to customary closing conditions, is anticipated to be completed in the second quarter of 2015.

Regency is a master limited partnership based in Dallas, Texas. It provides a portfolio of midstream services to producers of natural gas and natural gas liquids.

The company’s assets are located in several of the US shale plays and gas formations including the Haynesville, Eagle Ford, Barnett, Fayetteville, Bone Spring, Avalon and Granite Wash.

Energy Transfer Equity (ETE) owns the general partner and 100% of the incentive distribution rights (IDRs) of both Regency and ETP.

ETE has agreed to reduce the incentive distributions it receives from ETP by a total of $320m for a period of five years.

ETP and Regency intend to take advantage of the combined gathering and processing platforms in various producing regions, including the Permian Basin and Eagle Ford Shale.

Regency chief executive officer Mike Bradley said: "Together, we have built Regency into one of the largest gathering and processing MLPs in the U.S. over the last several years.

"In light of the current volatility in commodity prices and the changes in the capital markets, it became apparent over the last several months that Regency needed more scale and diversification, along with an investment grade balance sheet, to continue its growth."

ETP owns and operates about 35,000 miles of natural gas and natural gas liquids pipelines.