NuStar Energy gained more than 20% early Monday, looking to seize a nearly four-year high, after it announced it will combine with Sunoco in an all-stock deal valued at $7.3 billion, including debt. SUN shares edged lower Monday. Both companies are high yield dividend stocks.
NuStar common unit holders will receive 0.400 Sunoco common units for each NuStar common unit, a 24% premium 30-day volume-weighted average prices of NuStar and Sunoco as of Jan. 19, according to the press release. The Dallas-based Sunoco has secured a $1.6 billion 364-day bridge term loan to refinance NuStar's Series A, B and C preferred units, subordinated notes, revolving credit facility, and receivables financing agreement.
NuStar and Sunoco expect the deal to be closed in the second quarter. The two companies predict the consolidation will create $50 million a year of additional cash flow while also generating "at least" $150 million of run-rate synergies in three years time.
Sunoco has a market cap of about $5 billion while NuStar's market cap is around $2.2 billion. Both companies are master limited partnerships, with Sunoco currently yielding 5.7% and NuStar supplying an 8.9% payout.
NuStar Stock Heads For Buy Point
NS shares jumped 18.4% during Monday's market action. Sunoco stock dropped around 4.6%. On Friday, SUN shares edged down 1.7% to 59.46 while NuStar stock closed at 18.03.
Sunoco is a distributor of motor fuel to thousands of locations in 40 U.S. states. Meanwhile, the San Antonio-based NuStar transports and stores petroleum products. NuStar's business segments include pipeline, storage and fuels marketing.
As of the beginning of 2023, NuStar had 9,465 miles of pipeline and 63 terminal and storage facilities, which provide approximately 49 million barrels of storage capacity, according to federal filings.
NuStar stock is currently in a flat base with an official 19.32 buy point, according to MarketSmith analysis. Sunoco is extended, after rallying almost 28% following a September breakout.
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