The Dreyfus purchase touched off a string of dealmaking that made Wall Street nervous. Next, Energy Transfer won a bidding war with Williams Partners to acquire Southern Union for $8.5 billion. Southern Union brought 20,000 miles of pipelines stretching into Florida and Michigan as well as a liquefied natural gas facility in Lake Charles, Louisiana, that Warren saw as a potential export gold mine.
The deal had barely closed when he learned that venerable Sunoco, operator of 4,900 gas stations and a vast Texas shipping terminal—the company where his father worked for more than 40 years—was available.
It seemed a stretch for Energy Transfer. “We were not in gas stations and peanuts and Slurpees,”Warren says. Worse, “we were getting a reputation as deal junkies. We had critics saying anybody can grow if they just keep buying things.”
Again Warren turned to his board. The directors saw a good fit, he recalls. “They said: ‘Kelcy, what are we missing? Why wouldn’t we do that?’” He sent deputies to New York to calm the ratings firms. Sunoco went to Energy Transfer for $8.7 billion.
Even as Energy Transfer Partners has added debt, it has kept its rating at the lowest investment-grade level. Both Moody’s Investors Service and S&P say the outlook for the debt rating is stable.
More deals were to come, including January’s $18 billion pact to merge with Dallas-based Regency Energy Partners. But it was Dreyfus, Southern Union, and Sunoco that gave Energy Transfer the financial and geographic heft to vie with the likes of Enterprise Products Partners and Kinder Morgan, the largest U.S. pipeline company and source of Chairman Richard Kinder’s $12.4 billion fortune.
Warren says the pieces of his hydraulic machine are working well together. Today, the company is converting an old Southern Union gas pipeline to carry Bakken crude from Illinois to the Sunoco terminal in Nederland, Texas. Ships that tie up at one of the five Nederland docks recently started loading propane funneled from a fractionation plant on a site once owned by Dreyfus in Mont Belvieu, Texas. The propane is moving all over the world.
“When they make an acquisition, they’ve got an ability to see something associated with that acquisition nobody else sees,” says Brian Kessens, managing director at Tortoise Capital Advisors, one of the biggest unitholders in Energy Transfer and related entities.
The counterpoint is that the complexity of Warren’s empire might eventually catch up with him, says senior analyst Ethan Bellamy of Robert W. Baird & Co. “There’s a danger that there’s so many moving parts that it’s hard for anyone to keep their finger on it all.”