US fuel distribution company Sunoco has entered into a definitive agreement to acquire NuStar Energy in an all-equity transaction valued at approximately $7.3bn, including assumed debt.  

The acquisition is a strategic move for Sunoco, aimed at enhancing stability, diversifying its business and capturing the benefits of vertical integration.  

As per the terms of the agreement, NuStar’s unitholders will receive 0.400 Sunoco common units in exchange of each NuStar common unit held. 

NuStar, which is engaged in liquids terminal and pipeline operations, boasts more than 15,200km of pipeline and 63 terminal and storage facilities.  

These facilities play a crucial role in storing and distributing a diverse range of liquids such as crude oil, refined products and specialty liquids across the US and Mexico.  

The strategic rationale for Sunoco includes not only increased stability and diversification but also the scaling up of its business.  

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By GlobalData

The combined entity is expected to strengthen Sunoco’s financial foundation, continue its capital allocation strategy and improve its credit profile.  

This, in turn, supports a growing distribution and enhances cash flow generation for reinvestment and growth opportunities. 

Sunoco and NuStar anticipate cost savings of $150m by the third-year post-closure, with the deal expected to conclude in the second quarter of 2024.  

This is subject to the satisfaction of closing conditions including approval from NuStar’s unitholders and customary regulatory approvals.  

Both company boards have unanimously approved the transaction. 

Sunoco, headquartered in Dallas, is an affiliate of Energy Transfer and is engaged in the distribution of motor fuel to a vast network of locations including convenience stores and commercial customers across the US.  

The acquisition comes at a time when the US oil and gas industry is witnessing a wave of consolidation, with major players such as ExxonMobil and Chevron making multi-billion dollar deals.