AmeriGas will buy the propane operations of Energy Transfer Partners for about $2.9 billion, the company said Monday.
The Valley Forge, Pa., propane retailer is paying $1.5 billion in cash and about $1.3 billion in AmeriGas common stock. It also will assume $71 million in Energy Transfer's debt.
Energy Transfer Partners L.P., of Dallas, has propane operations in 41 states through subsidiaries including Heritage Propane. The deal gives more than a million additional retail propane customers to AmeriGas, effectively doubling its size. It's expected to contribute to AmeriGas' goal of increasing its distribution by 5 percent per year.
The deal is expected to close late this year or early in 2012. AmeriGas Partners LP said shareholder approval is not required at either company.
"This transaction provides AmeriGas with an outstanding opportunity to grow its core business," CEO Eugene V.N. Bissell said in a statement.
It is also the third sizeable energy deal announced in just two days.
Earlier Monday, Norwegian oil company Statoil ASA said it would buy Brigham Exploration Co. of Austin, Texas for $4.4 billion in cash, giving it control of fields in North Dakota. That came a day after Kinder Morgan announced plans to buy El Paso Corp. for $20.7 billion in a bid to create America's largest natural gas pipeline operator.
After closing, Energy Transfer will own about 34 percent of AmeriGas Partners' common stock and will keep the shares until at least 2013. Energy Transfer will appoint one director to AmeriGas' board after the closing.
The deal was structured so that AmeriGas' balance sheet would remain strong and its credit ratings preserved, the company said. It will contribute to AmeriGas' goal of growing earnings before interest, taxes, depreciation and amortization by 3 percent per year, the company said.
However, Fitch Ratings put the company on watch for a possible downgrade, saying the new debt will be inconsistent with AmeriGas' current ratings. Fitch also wrote that AmeriGas risks losing customers as it integrates the new propane operation.
Shares of AmeriGas, which has more than a million residential, industrial and commercial propane customers, closed Friday at $45.92 and have traded in a range of $36.76 to $51.50 in the past year. On Monday they fell $1.10, or 2.4 percent, to $44.82 in afternoon trading.