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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. 

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Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

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