A Dallas pipeline company recently agreed to buy out a Houston rival in a $7.1 billion deal.
Energy Transfer, co-founded by billionaire Kelcy Warren, completed a deal to purchase Crestwood Equity Partners of Houston, the companies said in a news release.
The Dallas company is one of the largest pipeline companies in the country, sending oil and natural gas across a 125,000-mile network.
Crestwood has pipeline and storage assets in West Texas, North Dakota, Wyoming, and Montana, the Wall Street Journal reported.
The joining of the two companies is the latest merger in the North American fuel infrastructure business, and it will allow Energy Transfer to pick up valuable shale assets. In May, Oneok agreed to by Magellan Midstream Partners for $14 billion. The deal, another recent example of industry consolidation, has not yet closed.
Crestwood shareholders will take a 6.5% stake in Energy Transfer under terms of the all-equity deal, the Financial Times reported. The $7.1 billion deal includes $3.3 billion in debt that Energy Transfer will assume.
“Scale is important — I think everybody that’s involved in the business knows how important scale is,” Crestwood CEO Robert Phillips said on a conference call with analysts on Wednesday, per the Financial Times. “The synergies I think are obvious any time you combine two companies like this.”
Energy Transfer said it expected the deal to generate $40 million in annual cost synergies, the WSJ reported.
Shares of both companies rose on the New York Stock Exchange. Energy Transfer shares finished up 1.67% to $12.77 on Wednesday. Shares in Crestwood gained 1.2% to hit $27.39 a share.
“We view the deal as neutral for [Energy Transfer] as it expands its footprint in the Williston [North Dakota] and Permian basins and adds the Powder River Basin,” Elvira Scotto, an analyst at RBC Capital Markets, told the Financial Times.
The transaction comes on the heels of Energy Transfer’s $1.45 billion acquisition of Sugar Land-based Lotus Midstream Operations in a cash and stock deal in March. The deal allowed Energy Transfer to increase its footprint in the Permian Basin near Midland.