DALLAS & PHILADELPHIA -- The "cash consideration"--receiving cash for shares of stock--was the preferred method of exchange selected by Sunoco Inc. shareholders, the company said on Tuesday, as Energy Transfer Partners LP and Sunoco announced the preliminary results of the shareholders' elections regarding the form of merger consideration they wanted to receive in connection with ETP's pending acquisition of Sunoco.
The companies expect to complete the merger transaction on October 5. Sunoco will become a subsidiary of ETP and will cease to be a separate publicly traded company.
Meanwhile, Sunoco said in U.S. Securities & Exchange Commission (SEC) filings last week that it has settled litigation related to the merger.
Following the announcement of the merger on April 30, 2012, eight class action and derivative complaints challenging the merger were filed in the Court of Common Pleas of Philadelphia County, Pa. On August 1, these complaints were consolidated pursuant to court order, the documents said.
The complaint named as defendants Sunoco and the members of Sunoco's board of and alleged that they "breached their fiduciary duties by negotiating and executing, through an unfair and conflicted process, a merger agreement that provides inadequate consideration and contains impermissible terms designed to deter alternative bids." It also named as defendants ETP and several ETP subsidiaries, alleging that they "aided and abetted the breach of fiduciary duties by Sunoco's directors."
On September 24, Sunoco entered into a memorandum of understanding with the plaintiffs regarding the settlement of the litigation, according to the documents.
The company said, "While Sunoco believes that the claims in the amended consolidated complaint are without merit, Sunoco has agreed, in order to avoid the expense and burden of continued litigation and pursuant to the terms of the proposed settlement, to make certain supplemental disclosures related to the proposed merger. … In addition, Sunoco or its successors have agreed to provide limited outplacement assistance services to Philadelphia-area employees of Sunoco who are adversely affected by the completion of the merger within one year of its closing (if any)."
Regarding the merger, under the terms of the agreement, Sunoco shareholders were able to receive, for each Sunoco common share they owned, a combination of $25 in cash and 0.5245 of an ETP common unit, called the "standard mix of consideration." In lieu of receiving the standard mix of consideration, Sunoco shareholders, for each Sunoco common share they owned, could make an election to receive $50 in cash--the "cash consideration"; or 1.0490 ETP common units--the "unit consideration"--with such cash consideration and unit consideration subject to proration in accordance with the agreement.
Based on available information as of the election deadline of 5:00 p.m., New York time, on October 1, the preliminary election results were as follows:
- Holders of approximately 77,474,401 Sunoco shares, or approximately 73.92% of the outstanding Sunoco shares, elected to receive the cash consideration (which includes approximately 16,851,529 shares of common stock subject to guaranteed delivery procedures).
- Holders of approximately 20,147,879 Sunoco shares, or approximately 19.22% of the outstanding Sunoco shares, did not make a valid election or did not deliver a valid election form prior to the election deadline and, therefore, are deemed to have elected the standard mix of consideration.
- Holders of approximately 4,451,739 Sunoco shares, or approximately 4.25% of the outstanding Sunoco shares, elected to receive the unit consideration (which includes approximately 17,866 shares of common stock subject to guaranteed delivery procedures).
- Holders of approximately 2,733,842 Sunoco shares, or approximately 2.61% of the outstanding Sunoco shares, elected to receive the standard mix of consideration (which includes 538,007 shares of common stock subject to guaranteed delivery procedures).
Because the cash consideration was oversubscribed, holders of Sunoco shares electing to receive the cash consideration will receive a combination of cash and ETP common units as set forth in the merger agreement.
No fractional ETP common units will be issued, and Sunoco shareholders will receive cash in lieu of fractional common units.
After the final results of the election process are determined, the final merger consideration, and the allocation of the merger consideration, will be calculated in accordance with the merger agreement.
Dallas-based ETP is a publicly traded partnership owning and operating a diversified portfolio of energy assets. ETP has pipeline operations in Alabama, Arizona, Arkansas, Colorado, Florida, Louisiana, Mississippi, New Mexico, Utah and West Virginia and owns the largest intrastate pipeline system in Texas. ETP currently has natural gas operations that include approximately 24,000 miles of gathering and transportation pipelines, treating and processing assets, and three storage facilities located in Texas. ETP also holds a 70% interest in Lone Star NGL, a joint venture that owns and operates NGL storage, fractionation and transportation assets in Texas, Louisiana and Mississippi. ETP's general partner is owned by Energy Transfer Equity LP.
Philadelphia-based Sunoco is a leading logistics and retail company. It owns the general partner interest of Sunoco Logistics Partners LP, which consists of a 2% ownership interest and incentive distribution rights, and owns a 32.4% interest in the partnership's limited partner units. Sunoco Logistics Partners LP is an owner and operator of complementary pipeline, terminal and crude oil acquisition and marketing assets. Sunoco also has a network of approximately 4,900 retail locations in 23 states.
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