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The deal is the latest in a string of multibillion dollar mergers in the midstream energy storage and pipeline sector.
Shares of Sunoco were down more than 5 percent Monday afternoon, while ETP's stock was down more than 8 percent.
The merger will primarily address Energy Transfer's near-term coverage issues and create operational and administrative savings, said Jay Hatfield, a portfolio manager at InfraCap.
He said proposals by President-elect Donald Trump could provide some additional upside for the deal if he allows the Dakota Access Pipeline project to move forward.
The project has been held up from months as opposition from the Standing Rock Sioux tribe over the pipeline's path beneath its grounds has grown into a larger protest among activists, who have occupied land near the proposed construction site. Late Sunday, law enforcers and protesters clashed, injuring more than 150 people as tear gas, freezing cold water and rubber bullets were used to disperse what authorities said was an aggressive a crowd.
In his election campaign, Trump vowed to roll back regulations and unleash "a treasure trove of untapped energy" in the United States. In August, Trump said lifting restrictions on oil and gas would increase gross domestic product by more than $127 billion and add about 500,000 jobs, though some economists question those claims.
Discussing the deal on CNBC's "Squawk on the Street," Jim Cramer said the merger was the first "Trump deal" in the energy sector.
"Pipelines are going to be winners under Trump," Cramer said. "Energy Transfer's been trying to build that national network of natural gas. This is a very important deal and it's out of nowhere, and this group is finally going to break out."
But CNBC colleague David Faber said it doesn't appear to be based on anticipated moves by the Trump administration.
"It is more about the ability of ETE, Energy Transfer, to pay a dividend to its holders," Faber said.
Dealmaking in the midstream sector of the energy industry began to increase in the third quarter after several quarters of limited activity, according to PwCs' quarterly mergers and acquisitions report. The firm counted four megadeals worth greater than $1 billion in the space.
PwC's Doug Meier told CNBC last week market watchers will continue to see consolidation in the space because opportunities to grow revenues organically are dwindling. That means pipeline operators will seek to boost their bottom lines through mergers that help them cut costs.
Sunoco Logistics and Energy Transfer Partners said the combined operation would increase their scale and diversification across the resource basins they serve. It will also more closely integrate Sunoco's natural gas liquids business with Energy Transfer Partners' gas gathering, processing and transportation business.
The firms expect the deal to to create cost savings in excess of $200 million annually by 2019.
Sunoco Logistics said ETP shareholders would get 1.5 Sunoco units for each ETP share they own, which works out to about $39.30 per share. That's a slight discount to the stock's Friday close of $39.37. ETP, which owns and operates more than 62,500 miles of natural gas and natural gas liquids pipeline, owns about 21 percent of Sunoco Logistics, according to Thomson Reuters.
The companies said the deal was approved by both its boards and conflicts committees. The transaction is expected to close in the first quarter of 2017, subject to ETP unit-holder approval and other customary closing conditions, according to the companies.