Energy Transfer Partners Is Ready to Restart Its Acquisition Machine

According to Bloomberg, Energy Transfer Partners (NYSE: ETP  ) and Energy Transfer Equity (NYSE: ETE  ) were close to a $15 billion deal to acquire a rival MLP. While that deal has apparently now fallen apart, we shouldn't expect Energy Transfer Partners to give up on deal-making anytime soon.

Transformation continues
Since 2011, Energy Transfer Partners has spent $16 billion on acquisitions and organic growth projects. As the following slide points out, these investments have really diversified and grown profits since 2009.

Source: Energy Transfer Partners Investor Presentation (link opens a PDF). 

While the company has completed a number of notable organic growth projects, the bulk of its growth has come by way of acquisitions. In fact, according to Bloomberg, Energy Transfer Partners has completed $13 billion in acquisitions from 2010 to 2011 alone as it transformed its business into a more diversified energy powerhouse.

That being said, more recently, the company has spent its time digesting those deals and completing organic growth projects. Its only recent deal of note was competed earlier this year when Energy Transfer Partners announced a small $1.8 billion deal to bulk up its gas station business. While that was a smart deal for the company, as it provided it with a vehicle to monetize its own retail segment, it's rather small for a company of Energy Transfer Partners' size.

Ready to restart its acquisition machine
CEO Kelcy Warren predicted late last year that merger and acquisition activity in the energy infrastructure segment would ramp up. He noted that smaller geographically focused rivals were struggling to compete against railroads and larger rivals for market share, which would add to deal volume.

His prediction is beginning to unfold as he just watched one of his rivals announce a $6 billion deal that was the first step to creating a $100 billion energy giant. That deal could be the one that jump-starts the next wave of acquisitions.

Further, a new catalyst is beginning to emerge in the energy infrastructure segment that should spur more deals. As American energy production surges, it's creating opportunities for infrastructure companies like Energy Transfer Partners to begin to capitalize on energy exports. As the following slide notes, the company is already uniquely positioned to capitalize on the growing American energy export story.

Source: Energy Transfer Partners.

Not surprisingly, one of the assets of Energy Transfer Partners' rumored acquisition target was an energy export facility along the Gulf Coast. Given Energy Transfer Partners' strong position in the Gulf, increasing its ability to export energy from the region has appeal. That's why we'll likely see the company continue to pursue acquisition opportunities that have additional upside to energy exports.

Investor takeaway
While Energy Transfer Partners' rumored deal for a smaller rival is said to have fallen apart, that roadblock won't end the company's desire to continue acquiring. The company is certainly still on the prowl for its next deal as it continues its transformation to a diversified energy powerhouse. That's why it wouldn't be all that surprising to see the company announce a big deal before the year is done, with a likely target being a company with assets in the Gulf Coast that can enhance Energy Transfer Partners' ability to export energy as that story begins to unfold. 

Do you know this energy tax "loophole"?
Companies like Energy Transfer Partners can make investors like you a lot of money. The company is taking advantage of a special tax "loophole" that's designed to put extra cash into your pocket. You can learn how to take full advantage the companies using this loophole by grabbing your copy of our brand-new special report, "The IRS Is Daring You to Make This Investment Now!," where you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.


Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3002479, ~/Articles/ArticleHandler.aspx, 11/27/2014 1:32:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement