Nustar: Close of Sunoco deal in sight

Unitholders’ vote clears way for Texas companies’ merger

San Antonio pipeline and storage company Nustar Energy LP said the merger deal that will make it a subsidiary of Sunoco LP has received unitholder approval and is expected to close as early as Friday.

And in what’s likely to be its final earnings report before being swallowed up by the Dallasbased gas station owner, Nustar said profit nosedived in the three months through March even as revenue held steady.

Sunoco agreed in January to buy Nustar for about $6.5 billion in stock, giving it control of Nustar’s sprawling network of pipelines, terminals and other infrastructure crucial to its own supply chain.

Late Wednesday, Nustar said that about 69% of its unitholders voted in favor of the transaction, which the companies earlier had said would close in the second quarter. Now, they said it would close “on or about May 3, 2024, subject to the satisfaction of customary closing conditions.”

Last month, the companies said the deal had cleared a Federal Trade Commission regulatory waiting period, a key step toward completion in an environment that’s seen heightened scrutiny of energy company mergers.

The sale is likely to mean San Antonio is losing another corporate headquarters, though the companies have said Nustar will remain in its sprawling headquarters outside The Rim on the far North Side for at least two years. About 500 of the company’s 1,200 employees office there.

It sold the headquarters property in 2023 to Truist Financial Corp. for $103 million but kept its offices there under a sale-leaseback deal with a 20-year lease term.

Under the all-stock merger deal, Nustar common unitholders will receive four-tenths of a Sunoco common unit for each Nustar common unit when the transaction closes. Additionally, Nustar unitholders are anticipated to receive Sunoco’s first quarter 2024 distribution.

At market close on Thursday, Sunoco’s stock was trading at $55.06, while Nustar shares closed $21.96. That’s down about $2 per share less than the high that Nustar stock reached after

the merger was announced.

In its report of earnings in the three months through March, Nustar said net income was $42.74 million, or 15 cents per unit, down nearly 60% from $105.94 million, or 61 cents per unit, in the same period a year ago. Revenue was $390.83 million, down from $393.87 million.

The decline in profit is mostly related to a $13.5 million increase in general and administrative expenses and a $41.1 million gain realized in the period a year ago from the company selling its headquarters building.

Nustar issued the report in a regulatory filing, skipping its longstanding practice of providing commentary on the results from company leadership.