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ETE Merger
6 Months Ended
Jun. 30, 2011
Notes to Financial Statements [Abstract]  
ETE Merger
3. ETE Merger
 

On July 19, 2011, the Company entered into a Second Amended and Restated Agreement and Plan of Merger (Second Amended Merger Agreement) with ETE and Sigma Acquisition Corporation, a wholly-owned subsidiary of ETE (Merger Sub).  The Second Amended Merger Agreement modifies certain terms of the Agreement and Plan of Merger entered into by the Company, ETE and Merger Sub on June 15, 2011 as amended on July 4, 2011.  The Second Amended Merger Agreement provides for the merger of Merger Sub with and into the Company (Merger), with the Company continuing as the surviving corporation in the Merger.  As a result of the Merger, the Company will become a wholly-owned subsidiary of ETE.  The Merger is expected to close in the first quarter of 2012, subject to stockholder approval and certain other regulatory approvals.

 

Under the terms of the Second Amended Merger Agreement, at least 50 percent, and no more than 60 percent, of the shares of common stock of the Company issued and outstanding immediately prior to the effective time of the Merger (Outstanding Shares) will be cancelled and converted into the right to receive cash in the amount of $44.25 per Outstanding Share (subject to reduction of that amount of cash per Outstanding Share, and supplementation with ETE Common Units, in the event that holders of more than 60 percent of the Outstanding Shares elect to receive cash) and at least 40 percent, and no more than 50 percent of the Outstanding Shares will be cancelled and converted into the right to receive 1.0 ETE Common Units per Outstanding Share (subject to reduction of that number of ETE Common Units per Outstanding Share, and supplementation with cash, in the event that holders of more than 50 percent of the Outstanding Shares elect to receive ETE Common Units).

 

 On July 19, 2011, ETE entered into an amended and restated agreement and plan of merger (Citrus Merger Agreement) with Energy Transfer Partners , L.P. (ETP). Pursuant to the Citrus Merger Agreement, immediately prior to the effective time of the Merger, ETE will assign and Southern Union will assume the benefits and obligations of ETE under the Citrus Merger Agreement. Under the Citrus Merger Agreement, it is anticipated that Southern Union will cause the contribution to ETP of its 50 percent interest in Citrus Corp., which owns 100 percent of Florida Gas and is currently jointly owned by Southern Union and El Paso Corporation (Citrus Merger). The Citrus Merger will be effected through the merger of CrossCountry Energy, LLC, a Delaware limited liability company and wholly-owned subsidiary of Southern Union that indirectly owns a 50 percent interest in Citrus Corp., with and into Citrus ETP Acquisition, L.L.C., a Delaware limited liability company and wholly-owned subsidiary of ETP. In exchange for the interest in Citrus Corp., Southern Union will receive approximately $2.0 billion, consisting of $1.895 billion in cash and $105 million of ETP common units, with the value of the ETP common units based on the volume-weighted average trading price for the ten consecutive trading days ending immediately prior to the date that is three trading days prior to the closing date of the Citrus Merger.  Immediately prior to the effective time of the Merger, Southern Union will contribute to Merger Sub the funds it receives pursuant to the Citrus Merger (not to exceed $1.45 billion) in exchange for an equity interest in Merger Sub proportionate to its deemed share, which means the fraction (i) the numerator of which is the amount, if any, contributed by Southern Union to Merger Sub pursuant to the Second Amended Merger Agreement and (ii) the denominator of which is the aggregate value of the merger consideration of the Merger, valuing the ETE common units based upon the volume weighted average price of the ETE common units for the five trading days ending on the trading day immediately preceding the effective time of the Merger.

 

The Second Amended Merger Agreement contains certain termination rights for the Company and ETE. In certain circumstances, upon termination of the Second Amended Merger Agreement, the Company or ETE, as applicable: (i) will be required to pay a termination fee of $181.3 million to the other and (ii) may be obligated to pay the other's Merger costs and expenses in an amount not to exceed $54 million.

 

Consummation of the merger is subject to customary conditions, including, without limitation: (i) the adoption of the Second Amended Merger Agreement by the stockholders of the Company, (ii) the expiration of the waiting period applicable to the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, which expiration occurred on July 28, 2011, (iii) the receipt of required approvals from the FERC, the MPSC and, if necessary, the MDPU, (iv) the effectiveness of an ETE registration statement on Form S-4 relating to the ETE common units to be issued in the merger, and (v) the absence of any law, injunction, judgment or ruling prohibiting or restraining the merger or making the consummation of the merger illegal.

On July 13, 2011, the Company and ETE filed a joint application with the MPSC, requesting an order from the MPSC authorizing the Company to take certain actions to allow ETE to acquire the equity interests of the Company, including its subsidiaries. On July 11, 2011, as amended July 26, 2011, ETE filed a registration statement on Form S-4 relating to the registration of the ETE common units to be issued in the merger.

The Company has made certain customary representations and warranties and covenants in the Second Amended Merger Agreement, including without limitation covenants regarding: (i) the conduct of the business of the Company prior to the consummation of the merger, (ii) the calling and holding of a meeting of the Company's stockholders for the purpose of obtaining its required stockholder approval and (iii) the use of reasonable best efforts to cause the merger to be consummated.