Energy distributor Sunoco LP (NYSE:SUN) has agreed to acquire NuStar Energy (NYSE:NS) in an all-stock deal worth $7.3 billion. While the announcement is putting pressure on SUN shares, NS stock has shot up by nearly 25% so far today.
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Under the deal, common unitholders of NuStar will receive 0.4 common units of Sunoco for each NS unit they hold. The deal implies a 24% premium over the 30-day volume-weighted-average price of both companies as of January 19. The deal has been approved by the boards of both companies and is anticipated to close in the second quarter of 2024.
Importantly, the strategic M&A move promises increased cash flow, a diversified business profile, and scale for the combined entity. Additionally, the deal is expected to be accretive to Sunoco’s distributable cash flow by the third year of closing.
For Sunoco, the announcement comes fresh on the heels of its sale of 204 convenience stores to 7-Eleven for nearly $1 billion. The company also plans to gain control of strategic liquid fuel terminals in Amsterdam, Netherlands, and Bantry Bay, Ireland, by acquiring a 100% equity interest in Zenith Energy Netherlands Amsterdam B.V.
Is Sunoco a Good Stock to Buy?
Overall, the Street has a Moderate Buy consensus rating on Sunoco, and the average SUN price target of $57.67 points to a potential downside of 3% in the stock. That’s after a nearly 32% jump in the company’s share price over the past year.
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