AmeriGas Partners LP on Monday agreed to pay $2.9 billion for the propane businesses of Energy Transfer Partners LP (ETP).

With 1.3 million customers in all 50 states and 1,200 locations, AmeriGas is the largest retail propane distributor in the United States. ETP has propane operations in 41 states through subsidiaries Heritage Operating LP and Titan Energy Partners LP.

Under terms of the agreement, AmeriGas would pay ETP $1.5 billion in cash and $1.3 billion in common units. AmeriGas also agreed to assume $71 million of Heritage debt. Once completed ETP would own more than one-third of AmeriGas common units, which it committed to retain until at least 2013.

“Our exit from our successful propane operations was not an easy decision; however, the structure and corresponding benefits of this transaction with AmeriGas, a company we have always admired in this business, make this the right move at the right time for Energy Transfer as we focus our efforts and resources on opportunities in the pipeline sector — our primary business,” said ETP CEO Kelcy Warren.

ETP’s managing partner Energy Transfer Equity LP (ETE) in June launched a takeover of Southern Union Co., which at the time would have created the largest natural gas pipeline franchise in the United States — that is, in advance of the Kinder Morgan/El Paso Corp. tie-up announced on Monday (see related story). Following a back-and-forth bidding war with Williams, Southern Union in July accepted a $44.25/share revised merger offer from ETE (see Daily GPI, July 20; June 17). The agreement still requires shareholder approval.

The transaction “provides substantial funds toward reduction of ETP’s debt, thereby significantly reducing ETP’s external capital requirements, including equity issuances,” said ETP CFO Martin Salinas.

The tie-up, which is expected to close by early next year, would add more than one million retail propane customers and more than 500 million gallons to AmeriGas’ nationwide propane distribution companies, said CEO Eugene Bissell.

“This transaction provides AmeriGas with an outstanding opportunity to grow its core business,” he said. “The combination of these two customer-focused teams will provide us with the unique opportunity to utilize a broader platform to enhance productivity, develop new growth opportunities and deploy new technologies.”

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