S-4
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As filed with the Securities and Exchange Commission on September 14, 2023

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

ENERGY TRANSFER LP

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   4922   30-0108820
(State or other jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial Classification Code Number)   (I.R.S. Employer
Identification Number)

8111 Westchester Drive, Suite 600

Dallas, Texas 75225

(214) 981-0700

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Thomas E. Long

Co-Chief Executive Officer

Energy Transfer LP

8111 Westchester Drive, Suite 600

Dallas, Texas 75225

(214) 981-0700

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

James M. Wright
Executive Vice President, General Counsel and Chief Compliance Officer
Energy Transfer LP
8111 Westchester Drive, Suite 600
Dallas, Texas 75225
(214) 981-0700
 

Julian Seiguer, P.C.
Sean T. Wheeler, P.C.

Debbie P. Yee, P.C.

Atma J. Kabad
Kirkland & Ellis LLP
609 Main Street
Houston, Texas 77002
(713) 836-3600

  Robert T. Halpin
President
Crestwood Equity Partners LP
811 Main Street, Suite 3400
Houston, Texas 77002
(832) 519-2200
  

Sarah K. Morgan

Stephen M. Gill

E. Ramey Layne

Vinson & Elkins L.L.P.

845 Texas Avenue, Suite 4700

Houston, Texas 77002

(713) 758-2222

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and the satisfaction or waiver of all other conditions to the closing of the merger described herein.

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐ (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this document is not complete and may be changed. Energy Transfer LP may not issue the securities described herein until the registration statement filed with the Securities and Exchange Commission is effective. This document is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED SEPTEMBER 14, 2023

 

LOGO

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

Dear Unitholder of Crestwood Equity Partners LP:

On August 16, 2023, Crestwood Equity Partners LP (“Crestwood”) entered into an Agreement and Plan of Merger (the “merger agreement”) with Energy Transfer LP (“Energy Transfer”), Pachyderm Merger Sub LLC, a wholly owned subsidiary of Energy Transfer (“Merger Sub”), and, solely for the purposes of Sections 2.1(a), 2.1(b), 2.1(c) and 5.21 thereof, LE GP, LLC (“ET GP”), pursuant to which Crestwood will merge with and into Merger Sub (the “merger”), with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer (the “Surviving Entity”).

If the merger is completed, holders of common units representing limited partner interests in Crestwood (such units, the “Crestwood common units” and such holders, the “Crestwood common unitholders”) will receive, for each Crestwood common unit that they own as of immediately prior to the effective time of the merger (the “effective time”), 2.07 common units (the “exchange ratio”), each representing a limited partner interest in Energy Transfer (the “ET common units” and such consideration, the “common unit merger consideration”).

Each preferred unit representing a limited partner interest in Crestwood (the “Crestwood preferred units,” and together with the Crestwood common units, the “Crestwood units”) outstanding immediately prior to the effective time will, at the election of the holder of such Crestwood preferred unit (each, a “Crestwood preferred unitholder” and together with the Crestwood common unitholders, the “Crestwood unitholders”) in accordance with the Sixth Amended and Restated Agreement of Limited Partnership of Crestwood, dated as of August 20, 2021, as may be amended if the requisite consents are obtained in connection with the Preferred Consent Solicitation, as described below (the “Crestwood Partnership Agreement”), (i) convert into Crestwood common units, at the then-applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time, (ii) convert into a new Energy Transfer security that has substantially similar terms, including with respect to economics and structural protections, as the Crestwood preferred units, as such terms may be amended if the requisite consents are obtained in connection with the Preferred Consent Solicitation (the “new ET preferred units,” and together with the ET common units, the “ET units,” and the holders of the new ET preferred units, the “new ET preferred unitholders”) or (iii) be redeemed in exchange for cash or Crestwood common units, at the sole discretion of Crestwood Equity GP LLC, the general partner of Crestwood (“Crestwood GP”), at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $                 per Crestwood preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption (an election to be redeemed as described in this clause (iii), a “Redemption Election” and such cash and/or such new ET preferred units payable as set forth in the foregoing clauses (ii) and (iii), the “preferred consideration”).

Crestwood preferred unitholders that receive Crestwood common units pursuant to the foregoing clauses (i) or (iii) will be entitled to receive the common unit merger consideration at the effective time. If no election is made by a holder of Crestwood preferred units, such holder will be deemed to have elected to receive new ET preferred units. Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have elected to have such Crestwood preferred units redeemed as described in clause (iii) above.

In the merger, each outstanding restricted unit of Crestwood (a “Crestwood restricted unit”) will be entitled to receive the common unit merger consideration. The vesting restrictions applicable to each Crestwood restricted unit that has a grant date prior to January 1, 2023 will lapse immediately prior to the effective time. For all other Crestwood restricted units, the same restrictions and other terms and conditions that were applicable


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immediately prior to the effective time will continue to apply after the effective time. Each outstanding performance unit of Crestwood (a “Crestwood performance unit”) that has a grant date prior to January 1, 2023 or that is otherwise vested at the effective time will be cancelled at the effective time in exchange for (i) the common unit merger consideration in respect of the corresponding number of Crestwood common units (including any reinvested distribution equivalent rights) issuable pursuant to such Crestwood performance unit based upon the attainment of the applicable Crestwood performance assumption (as described below) and (ii) an amount in cash equal to any accrued but unpaid cash distribution equivalents with respect to such Crestwood performance units. All other Crestwood performance units will be assumed by Energy Transfer (an “assumed performance unit award”) and converted into a time-based phantom unit award representing a contractual right upon vesting to receive a number of ET common units equal to the product obtained by multiplying (i) the number of Crestwood common units subject to such assumed performance unit award immediately prior to the effective time assuming attainment of the applicable Crestwood performance assumption by (ii) the exchange ratio. Each assumed performance unit award will otherwise be subject to the same terms and conditions that were applicable to the corresponding Crestwood performance unit immediately prior to the effective time other than the performance-based vesting conditions and, in the event any distribution is declared in respect of ET common units, the corresponding distribution equivalent right for each assumed performance unit award will be settled within 30 days following the time when distributions are paid to ET common unitholders generally. The “Crestwood performance assumptions” are as follows: (A) with respect to a Crestwood performance unit granted prior to January 1, 2023, a performance multiplier of 100%, and (B) with respect to a Crestwood performance unit granted on or after January 1, 2023, the target level of performance for the relevant Crestwood restricted unit, Crestwood performance unit or Crestwood phantom unit, as applicable.

If the merger is completed, Crestwood GP’s general partner interest in Crestwood will be automatically cancelled and cease to exist without any conversion thereof and no consideration will be received therefor.

Crestwood common units are currently traded on the New York Stock Exchange (the “NYSE”) under the symbol “CEQP.” Crestwood preferred units are currently traded on the NYSE under the symbol “CEQP-P.” ET common units are currently traded on the NYSE under the symbol “ET.”

The obligations of Energy Transfer and Crestwood to complete the merger are subject to the satisfaction or waiver of a number of conditions set forth in the merger agreement, including the approval of Crestwood unitholders as described below. A copy of the merger agreement is attached as Annex A to the accompanying proxy statement/prospectus.

In connection with the merger, Crestwood will hold a virtual special meeting of its unitholders (the “special meeting”) to consider and vote on a proposal to approve and adopt the merger agreement (the “merger proposal”). The affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class, is required to approve the merger proposal. At the special meeting, Crestwood unitholders will also vote on proposals to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Crestwood’s named executive officers in connection with the merger, which is not a condition to the merger (the “advisory compensation proposal”), and the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes cast at the special meeting to adopt the merger proposal (the “adjournment proposal”). Approval of the advisory compensation proposal will require the affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class. Approval of the adjournment proposal will require the affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class, present online or by proxy at the special meeting.

The virtual special meeting will be held at www.virtualshareholdermeeting.com/CEQP2023SM on                 , 2023 at                  a.m. central time. Unitholders of record as of                 , 2023 (the “record date”) are entitled to vote at the special meeting. The members of the board of directors of Crestwood GP (the “Crestwood board of directors”) unanimously recommend that Crestwood unitholders vote “FOR” the merger proposal, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal.


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In addition, separately from the solicitation of votes pursuant to the accompanying proxy statement/prospectus, at the direction of Energy Transfer pursuant to certain provisions of the merger agreement (see “The Merger Agreement—Other Covenants and Agreements”), Crestwood is also soliciting consents (the “Preferred Consent Solicitation”) from Crestwood preferred unitholders (as defined below) to amend certain terms of the Crestwood Partnership Agreement relating to the Crestwood preferred units proposed by Energy Transfer pursuant to the merger agreement. Such consent solicitation is being conducted by Crestwood pursuant to a consent solicitation statement on Schedule 14A, filed by Crestwood with the Securities and Exchange Commission on                 , 2023 and mailed to the Crestwood preferred unitholders on or about the same date (the “Crestwood Consent Solicitation Statement”), which more fully describes the proposed amendments to the Crestwood Partnership Agreement. If the requisite consents are obtained in the Preferred Consent Solicitation, the adoption of such amendments will be conditioned on the satisfaction or waiver of the conditions to the closing of the merger. If such amendments are adopted (i) the terms of any new ET preferred units issued to the Crestwood preferred unitholders electing to receive such units in the merger will be substantially similar to the terms of the Crestwood preferred units as so amended and (ii) the redemption price payable to the Crestwood preferred unitholders who make a Redemption Election will be $                 per Crestwood preferred unit. A summary of the Preferred Consent Solicitation can be found in the section of this proxy statement/prospectus entitled “Preferred Consent Solicitation.” However, for additional information, Crestwood preferred unitholders should read the Crestwood Consent Solicitation Statement. The merger is not conditioned upon Crestwood obtaining the requisite consents to amend the terms of the Crestwood Partnership Agreement in the Preferred Consent Solicitation. If the requisite consent in the Preferred Consent Solicitation is not obtained, the current terms of the Crestwood Partnership Agreement, including all of the terms of the Crestwood preferred units, will remain unchanged.

Your vote is very important. Information about the special meeting, the merger and the other business to be considered by the Crestwood unitholders at the special meeting is contained in the accompanying proxy statement/prospectus, which we urge you to read. In particular, see the section titled “Risk Factors” beginning on page 28 of the proxy statement/prospectus. In addition, we urge Crestwood preferred unitholders to read the Crestwood Consent Solicitation Statement for additional information regarding the Preferred Consent Solicitation.

The Crestwood board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Crestwood and its unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, (iv) resolved to recommend adoption of the merger agreement by the Crestwood unitholders and (v) directed that the merger agreement be submitted to the Crestwood unitholders for adoption.

Sincerely,

Robert G. Phillips

Founder, Chairman and Chief Executive Officer

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under the accompanying document or determined that the accompanying document is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying document is dated                 , 2023 and is first being mailed to the Crestwood unitholders on or about                 , 2023.


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LOGO

NOTICE OF SPECIAL MEETING OF UNITHOLDERS

TO BE HELD VIRTUALLY ON                 , 2023

Dear Unitholder of Crestwood Equity Partners LP:

On                 , 2023, Crestwood Equity Partners LP (“Crestwood”) will virtually hold a special meeting of unitholders (the “special meeting”) at www.virtualshareholdermeeting.com/CEQP2023SM at                  a.m., central time. Only Crestwood unitholders of record at the close of business on                 , 2023, the record date, are entitled to receive this notice and to vote at the special meeting or any adjournment or postponement of that meeting. The special meeting has been called for the following purposes:

 

  1.

To consider and vote upon a proposal to approve and adopt the Agreement and Plan of Merger dated as of August 16, 2023 (the “merger agreement”), by and among Crestwood, Energy Transfer LP (“Energy Transfer”), Pachyderm Merger Sub LLC (“Merger Sub”) and, solely for the purposes of Sections 2.1(a), 2.1(b), 2.1(c) and 5.21 thereof, LE GP, LLC (“ET GP”), pursuant to which, among other things, Crestwood will be merged with and into Merger Sub (the “merger”), with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer, and the transactions contemplated thereby (the “merger proposal”);

 

  2.

To consider and cast an advisory (non-binding) vote on specified compensation that may be received by Crestwood’s named executive officers in connection with the merger (the “advisory compensation proposal”);

 

  3.

To consider and vote upon any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal (the “adjournment proposal”); and

 

  4.

To transact such other business as may properly come before the special meeting and any adjournment or postponement thereof.

To be admitted to the special meeting at www.virtualshareholdermeeting.com/CEQP2023SM, unitholders must enter the 16-digit control number found on their proxy card or voting instruction form. Once properly admitted to the special meeting, unitholders of record as of the record date may vote their units by following the instructions available on the meeting website during the meeting and may also view the complete list of unitholders entitled to vote at the special meeting. Technical support will be available on the virtual meeting website beginning 15 minutes prior to the start of the special meeting. The technical support offered through this service is designed to address difficulties related to the virtual meeting website, and it is recommended that you contact your bank, broker or other nominee should you be unable to locate your 16-digit control number.

The board of directors of Crestwood Equity GP LLC (the “Crestwood board of directors”), the general partner of Crestwood (“Crestwood GP”), has unanimously approved and adopted the merger agreement and is submitting the merger agreement to holders of Crestwood common units (“Crestwood common unitholders”) and Crestwood preferred units (“Crestwood preferred unitholders” and together with the Crestwood common unitholders, the “Crestwood unitholders”) for approval and adoption at the special meeting. The merger agreement will be approved and adopted upon receiving the affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class.

Whether or not you plan to participate in the virtual special meeting, please submit your proxy with voting instructions as soon as possible. If you hold Crestwood common units or Crestwood preferred units in your name as a unitholder of record, please complete, sign, date and return the accompanying proxy card in the enclosed self-addressed stamped envelope, use the toll-free telephone number shown on the proxy card or use the internet


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website shown on the proxy card. If you hold Crestwood common units or Crestwood preferred units through a bank, broker or other nominee, please use the voting instructions you have received from your bank, broker or other nominee. If you hold Crestwood common units or Crestwood preferred units through a bank, broker or other nominee, and you have not received a 16-digit control number, please contact your bank, broker or other nominee as soon as possible so that you can be provided with a 16-digit control number. Submitting your proxy will not prevent you from attending the special meeting and voting online.

You may revoke your proxy by participating in the virtual special meeting and voting your Crestwood common units or Crestwood preferred units online at the special meeting. You may also revoke your proxy at any time before it is voted by giving written notice of revocation to the Corporate Secretary of Crestwood at the address provided with the proxy card at or before the special meeting or by submitting a proxy with a later date.

Other sections of the proxy statement/prospectus describe the proposals listed above in more detail, as well as other matters contemplated in connection with the proposed merger. Before voting, please carefully read the proxy statement/prospectus in its entirety, including the merger agreement and all other annexes and including documents incorporated by reference, for further information relevant to the business to be transacted at the special meeting. In particular, see “Proposal 1: The Merger,” beginning on page 49, for a description of the transactions contemplated by the merger agreement, and “Risk Factors,” beginning on page 28, for an explanation of the risks associated with the merger and the other transactions contemplated by the merger agreement.

The Crestwood board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Crestwood and its unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, (iv) resolved to recommend adoption of the merger agreement by the Crestwood unitholders and (v) directed that the merger agreement be submitted to the Crestwood unitholders for adoption. In addition, the Crestwood board of directors recommends that the Crestwood unitholders vote to approve, on an advisory (non-binding) basis, specified compensation that may be received by Crestwood’s named executive officers in connection with the merger and to approve an adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal.

The Crestwood board of directors recommends that the Crestwood unitholders vote:

 

  1.

FOR” the merger proposal;

 

  2.

FOR” the advisory compensation proposal; and

 

  3.

FOR” the adjournment proposal.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF UNITS THAT YOU OWN. The merger between Energy Transfer and Crestwood cannot be completed without the adoption of the merger proposal by the affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class.


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If you have any questions concerning the merger or the other transactions contemplated by the merger agreement or the accompanying proxy statement/prospectus or would like additional copies, please contact Crestwood’s proxy solicitor:

 

LOGO

Innisfree M&A Incorporated

501 Madison Avenue, 20th floor

New York, New York 10022

Unitholders may call toll free: (877) 750-0854

Banks and Brokers may call collect: (212) 750-5833

By Order of the Board of Directors,

ROBERT G. PHILLIPS

Founder, Chairman and Chief Executive Officer

            , 2023


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ADDITIONAL INFORMATION

This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”), constitutes a proxy statement of Crestwood under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the solicitation of proxies for the special meeting of holders of Crestwood common units (“Crestwood common unitholders”) and Crestwood preferred units (“Crestwood preferred unitholders” and together with the Crestwood common unitholders, the “Crestwood unitholders”), or any adjournment or postponement thereof, to, among other things, approve and adopt the merger agreement and the transactions contemplated thereby. This document is also a prospectus of Energy Transfer under Section 5 of the U.S. Securities Act of 1933, as amended (the “Securities Act”), for ET common units and new ET preferred units that may be issued to Crestwood unitholders in the merger pursuant to the merger agreement.

As permitted under the rules of the SEC, this document incorporates by reference important business and financial information about Energy Transfer and Crestwood from other documents filed with the SEC that are not included in or delivered with this document. Please read the section titled “Where You Can Find More Information.” You can obtain any of the documents incorporated by reference into this document from the SEC’s website at www.sec.gov. This information is also available to you without charge upon your request in writing or by telephone from Energy Transfer or Crestwood at the following addresses and telephone numbers:

 

Energy Transfer LP   Crestwood Equity Partners LP

8111 Westchester Drive, Suite 600
Dallas, Texas 75225
Attention: Investor Relations
Telephone: (214) 981-0795

 

811 Main Street, Suite 3400
Houston, Texas
Attention: Investor Relations
Phone: (832) 519-2200

Please note that copies of the documents provided to you will not include exhibits, unless the exhibits are specifically incorporated by reference into the documents or this document.

You may obtain certain of these documents at Energy Transfer’s website, www.energytransfer.com, and at Crestwood’s website, www.crestwoodlp.com. None of the information contained on the website of Energy Transfer or Crestwood is incorporated by reference into this document.

In order to receive timely delivery of the documents in advance of the special meeting, your request should be received no later than                , 2023. If you request any documents, Energy Transfer or Crestwood will mail them to you by first class mail, or another equally prompt means, within one business day after receipt of your request.

If you have any questions about the merger or the consideration that you will receive in connection with the merger, including any questions relating to the transmittal of materials, or would like additional copies of the letter of transmittal (which is being mailed to Crestwood unitholders separately), you may contact Crestwood’s proxy solicitor at the address and telephone number listed below. You will not be charged for any additional letters of transmittal that you request.

The Solicitation Agent for the Special Meeting is:

Innisfree M&A Incorporated

501 Madison Avenue, 20th floor

New York, New York 10022

You may obtain information regarding the Special Meeting

from the Solicitation Agent as follows:

Unitholders may call toll free: (877) 750-0854

Banks and Brokers may call collect: (212) 750-5833


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TABLE OF CONTENTS

 

         Page  

QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING

     1  

SUMMARY

     14  

    

 

Information About the Companies (See page 40)

     14  
 

The Merger (See page 49)

     14  
 

Common Unit Merger Consideration and Preferred Consideration (See page 91)

     14  
 

Election Form (See page 91)

     15  
 

Treatment of Crestwood Equity Awards (See page 78)

     16  
 

Treatment of Crestwood Indebtedness (See page 111)

     16  
 

Preferred Consent Solicitation (See page 47)

     17  
 

Risk Factors (See page 28)

     17  
 

Special Meeting of Crestwood Unitholders (See page 41)

     19  
 

Recommendation of the Crestwood Board of Directors and Reasons for the Merger (See page 58)

     20  
 

Opinion of Crestwood’s Financial Advisor (See page 63)

     20  
 

Interests of Crestwood’s Directors and Executive Officers in the Merger (See page 78)

     21  
 

Regulatory Approvals Required for the Merger (See page 86)

     21  
 

No Appraisal or Dissenters’ Rights (See page 95)

     21  
 

NYSE Listing of ET Units (See page 89)

     21  
 

Delisting and Deregistration of Crestwood Common Units and Preferred Units (See page 89)

     22  
 

Conditions to Completion of the Merger (See page 93)

     22  
 

Non-Solicitation by Crestwood (See page 103)

     22  
 

Termination of the Merger Agreement (See page 112)

     23  
 

Breakup Fee (See page 113)

     23  
 

Accounting Treatment of the Transactions (See page 86)

     24  
 

Material U.S. Federal Income Tax Consequences of the Merger (See page 115)

     24  
 

Comparison of Rights of Energy Transfer Common Unitholders, New ET Preferred Unitholders, Crestwood Common Unitholders and Crestwood Preferred Unitholders (See page 152)

     25  
 

Expected Timing of the Merger (See page 85)

     25  
 

Litigation Related to the Merger (See page 89)

     26  
 

Advisory Vote on Specified Compensation (See page 183)

     26  
 

Unaudited Comparative Per Unit Information of Energy Transfer and Per Unit Information of Crestwood

     26  

RISK FACTORS

     28  
 

Risk Factors Related to the Merger

     28  
 

Tax Risks Related to the Merger

     35  
 

Tax Risks Related to Owning ET Common Units and New ET Preferred Units Following the Merger

     36  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     38  

INFORMATION ABOUT THE COMPANIES

     40  

SPECIAL MEETING OF CRESTWOOD UNITHOLDERS

     41  
 

Date, Time and Place of the Special Meeting

     41  
 

Participating in the Special Meeting

     41  
 

Purpose of the Special Meeting

     41  
 

Recommendation of the Crestwood Board of Directors

     42  
 

Record Date; Unitholders Entitled to Vote; Outstanding Units Held

     42  
 

Quorum

     43  
 

Failure to Vote; Abstentions

     43  
 

Broker Non-Votes

     43  
 

Required Vote

     43  

 

i


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         Page  
 

Units Beneficially Owned by Directors and Executive Officers

     44  

    

 

Proxies

     44  
 

Units Held in Street Name

     44  
 

How to Submit Your Proxy

     45  
 

Revoking Your Proxy

     45  
 

Adjournments and Postponements

     45  
 

Inspector of Election

     46  
 

Proxy Solicitation

     46  
 

Householding of Special Meeting Materials

     46  
 

Other Business

     46  

PREFERRED CONSENT SOLICITATION

     47  

PROPOSAL 1: THE MERGER

     49  
 

Effects of the Merger

     49  
 

Background of the Merger

     49  
 

Recommendation of the Crestwood Board of Directors and Reasons for the Merger

     58  
 

Opinion of Crestwood’s Financial Advisor

     63  
 

Energy Transfer’s Reasons for the Merger

     71  
 

Crestwood and Energy Transfer Unaudited Prospective Financial Information

     72  
 

Interests of Crestwood’s Directors and Executive Officers in the Merger

     78  
 

Securities Ownership of Certain Beneficial Owners and Management

     84  
 

Merger Expenses, Fees and Costs

     85  
 

Expected Timing of the Merger

     85  
 

No Energy Transfer Unitholder Approval

     86  
 

Accounting Treatment of the Transactions

     86  
 

Regulatory Approvals

     86  
 

Exchange of Units

     87  
 

Listing of ET Common Units and New ET Preferred Units Issued in the Transactions; Delisting and Deregistration of Crestwood Common Units and Crestwood Preferred Units After the Transactions

     89  
 

Litigation Related to the Merger

     89  

THE MERGER AGREEMENT

     90  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     115  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF ET UNIT OWNERSHIP

     122  

DESCRIPTION OF ET COMMON UNITS

     142  

DESCRIPTION OF NEW ET PREFERRED UNITS

     149  

COMPARISON OF RIGHTS OF ENERGY TRANSFER COMMON UNITHOLDERS, NEW ET PREFERRED UNITHOLDERS, CRESTWOOD COMMON UNITHOLDERS AND CRESTWOOD PREFERRED UNITHOLDERS

     151  

PROPOSAL 2: ADVISORY VOTE ON SPECIFIED COMPENSATION

     182  

LEGAL MATTERS

     183  

EXPERTS

     183  

CRESTWOOD UNITHOLDER PROPOSALS

     184  

WHERE YOU CAN FIND MORE INFORMATION

     185  

ANNEX A — AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B — OPINION OF EVERCORE

     B-1  

 

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QUESTIONS AND ANSWERS ABOUT THE MERGER AND SPECIAL MEETING

Set forth below are questions that you, as a Crestwood unitholder, may have regarding the merger and the special meeting of Crestwood unitholders and brief answers to those questions. For a more complete description of the legal and other terms of the merger, please read this entire document, including the merger agreement, which is attached as Annex A to this proxy statement/prospectus, and the documents incorporated by reference into this document. You may obtain a list of the documents incorporated by reference into this document in the section “Where You Can Find More Information.”

 

Q:

Why am I receiving these materials?

 

A:

Energy Transfer and Crestwood have entered into a merger agreement, pursuant to which Energy Transfer will acquire Crestwood, and Crestwood will cease to be a publicly held limited partnership.

In order to complete the merger, Crestwood unitholders must vote to approve and adopt the merger agreement and the transactions contemplated thereby. This document is being delivered to you as both a proxy statement of Crestwood and a prospectus of Energy Transfer in connection with the merger. It is the proxy statement by which the board of directors of Crestwood Equity GP LLC, Crestwood’s general partner (“Crestwood GP” and such board of directors, the “Crestwood board of directors”) is soliciting proxies from you to vote in favor of the proposal to approve and adopt the merger agreement at the special meeting or at any adjournment or postponement of the special meeting. It is also the prospectus for the offering by Energy Transfer of ET common units and new ET preferred units (each as defined below) in the merger. This document also contains information about how Crestwood preferred unitholders can elect the form of consideration that they will receive in exchange for their Crestwood preferred units (see “The Merger Agreement—Common Unit Merger Consideration and Preferred Consideration—Preferred Election Procedures”).

This proxy statement/prospectus, which you should carefully read in its entirety, contains important information about the Crestwood special meeting, the merger and other matters.

 

Q:

What am I being asked to consider and vote on?

 

A:

Crestwood unitholders are being asked to consider and vote on the following proposals:

 

  (1)

to approve and adopt the merger agreement (attached as Annex A to this document) and the transactions contemplated thereby (the “merger proposal”);

 

  (2)

to approve, on an advisory (non-binding) basis, specified compensation that may be received by Crestwood’s named executive officers in connection with the merger (the “advisory compensation proposal”);

 

  (3)

to approve any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the proposal to approve and adopt the merger proposal (the “adjournment proposal”); and

 

  (4)

to transact such other business as may properly come before the special meeting and any adjournment or postponement thereof (at the present time, Crestwood knows of no other matters that will be presented for consideration at the special meeting).

 

Q:

How does the Crestwood board of directors recommend that I vote on the matters to be considered at the special meeting?

 

A:

The Crestwood board of directors recommends that the Crestwood unitholders vote:

 

   

FOR” the merger proposal;

 

   

FOR” the advisory compensation proposal; and

 

   

FOR” the adjournment proposal.

 

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See “Proposal 1: The Merger—Recommendation of the Crestwood Board of Directors and Reasons for the Merger” beginning on page 58.

In considering the recommendation of the Crestwood board of directors with respect to the merger proposal, you should be aware that some of Crestwood’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of Crestwood unitholders generally. See “Proposal 1: The Merger—Interests of Crestwood’s Directors and Executive Officers in the Merger” beginning on page 78.

 

Q:

What will happen in the merger?

 

A:

If the merger is completed, Crestwood will be merged with and into Merger Sub, with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer (the “Surviving Entity”). The merger will become effective on such date and at such time that the certificate of merger is filed with the Secretary of State of the State of Delaware, or such later date and time as may be agreed upon by Energy Transfer and Crestwood and set forth in the certificate of merger. Throughout this document, this date and time is referred to as the “effective time” of the merger. Crestwood GP’s general partner interest in Crestwood will be automatically cancelled and cease to exist without any conversion thereof and no consideration will be received therefor.

 

Q:

What will Crestwood unitholders receive for their Crestwood common units and Crestwood preferred units in the merger?

 

A:

If the merger is completed, at the effective time of the merger, Crestwood unitholders will receive, for each common unit representing limited partner interests in Crestwood (each, a “Crestwood common unit”) that they own as of immediately prior to the effective time of the merger, 2.07 common units (the “exchange ratio”), each representing a limited partner interest in Energy Transfer (the “ET common units” and such consideration, the “common unit merger consideration”). See “The Merger Agreement—Common Unit Merger Consideration and Preferred Consideration” on page 91.

Each preferred unit representing a limited partner interest in Crestwood (each, a “Crestwood preferred unit”) outstanding immediately prior to the effective time will, at the election of the holder of such Crestwood preferred unit (each, a “Crestwood preferred unitholder” and together with the Crestwood common unitholders, the “Crestwood unitholders”) in accordance with the Sixth Amended and Restated Agreement of Limited Partnership of Crestwood, dated as of August 20, 2021, as may be amended if the requisite consents are obtained in connection with the Preferred Consent Solicitation, as described below (the “Crestwood Partnership Agreement”), (i) convert into Crestwood common units, at the then-applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time, (ii) convert into a new Energy Transfer security that has substantially similar terms, including with respect to economics and structural protections, as the Crestwood preferred units, as such terms may be amended if the requisite consents are obtained in connection with the Preferred Consent Solicitation (the “new ET preferred units,” and together with the ET common units, the “ET units,” and the holders of the new ET preferred units, the “new ET preferred unitholders” and such holders, together with the ET common unitholders, “ET unitholders”) or (iii) be redeemed in exchange for cash or Crestwood common units, at the sole discretion of Crestwood GP, at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $                 per Crestwood preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption (an election to be redeemed as described in clause (iii), a “Redemption Election” and such cash and/or such new ET preferred units payable as set forth in the foregoing clauses (ii) and (iii), the “preferred consideration”).

 

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Crestwood preferred unitholders that receive Crestwood common units pursuant to the foregoing clauses (i) or (iii) will be entitled to receive the common unit merger consideration at the effective time. If no election is made by a holder of Crestwood preferred units, such holder will be deemed to have elected to receive new ET preferred units (such inaction, as applicable, a “default election”). Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have elected to have such Crestwood preferred units redeemed pursuant to a Redemption Election as described in clause (iii) above.

 

Q:

What will happen to Crestwood equity awards in the merger?

 

A:

Restricted Units. In the merger, each outstanding restricted unit of Crestwood (a “Crestwood restricted unit”) will be entitled to receive the common unit merger consideration. The vesting restrictions applicable to each Crestwood restricted unit that has a grant date prior to January 1, 2023 will lapse immediately prior to the effective time. For all other Crestwood restricted units, the same restrictions and other terms and conditions that were applicable immediately prior to the effective time will continue to apply after the effective time.

Performance Units. Each outstanding performance unit of Crestwood (a “Crestwood performance unit”) that has a grant date prior to January 1, 2023 or that is otherwise vested at the effective time will be cancelled at the effective time in exchange for (i) the common unit merger consideration in respect of the corresponding number of Crestwood common units (including any reinvested distribution equivalent rights) issuable pursuant to such Crestwood performance unit based upon the attainment of the applicable Crestwood performance assumption (as described below) and (ii) an amount in cash equal to any accrued but unpaid cash distribution equivalents with respect to such Crestwood performance units. All other Crestwood performance units will be assumed by Energy Transfer (an “assumed performance unit award”) and converted into a time-based phantom unit award representing a contractual right upon vesting to receive a number of ET common units equal to the product obtained by multiplying (i) the number of Crestwood common units subject to such assumed performance unit award immediately prior to the effective time assuming attainment of the applicable Crestwood performance assumption by (ii) the exchange ratio. Each assumed performance unit award will otherwise be subject to the same terms and conditions that were applicable to the corresponding Crestwood performance unit immediately prior to the effective time other than the performance-based vesting conditions and, in the event any distribution is declared in respect of ET common units, the corresponding distribution equivalent right for each assumed performance unit award will be settled within 30 days following the time when distributions are paid to ET common unitholders generally. The “Crestwood performance assumptions” are as follows: (A) with respect to a Crestwood performance unit granted prior to January 1, 2023, a performance multiplier of 100%, and (B) with respect to a Crestwood performance unit granted on or after January 1, 2023, the target level of performance for the relevant Crestwood restricted unit, Crestwood performance unit or Crestwood phantom unit, as applicable.

 

Q:

What is the Preferred Consent Solicitation?

 

A:

Separate from the solicitation of votes pursuant to the accompanying proxy statement/prospectus, at the direction of Energy Transfer pursuant to certain provisions of the merger agreement (see “The Merger Agreement—Other Covenants and Agreements”), Crestwood is also soliciting consents (the “Preferred Consent Solicitation”) from Crestwood preferred unitholders to amend certain terms of the Crestwood Partnership Agreement relating to the Crestwood preferred units proposed by Energy Transfer pursuant to the merger agreement. Such consent solicitation is being conducted by Crestwood pursuant to a proxy statement on Schedule 14A filed by Crestwood with the SEC on                , 2023 and mailed to the Crestwood preferred unitholders on or about the same date (the “Crestwood Consent Solicitation Statement”) and which more fully describes the proposed amendments to the Crestwood Partnership Agreement. If the requisite consents are obtained in the Preferred Consent Solicitation, the adoption of such amendments will be conditioned on the satisfaction or waiver of the conditions to the closing of the merger.

 

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  If such amendments are adopted (i) the terms of any new ET preferred units issued to the Crestwood preferred unitholders electing to receive such units in the merger will be substantially similar to the terms of the Crestwood preferred units as so amended and (ii) the redemption price payable to the Crestwood preferred unitholders who make a Redemption Election will be $                 per Crestwood preferred unit. A summary of the Preferred Consent Solicitation can be found in the section of this proxy statement/prospectus entitled “Preferred Consent Solicitation.” However, for additional information, Crestwood preferred unitholders should read the Crestwood Consent Solicitation Statement. The merger is not conditioned upon Crestwood obtaining the requisite consents to amend the terms of the Crestwood Partnership Agreement in the Preferred Consent Solicitation. If the requisite consent in the Preferred Consent Solicitation is not obtained, the current terms of the Crestwood Partnership Agreement, including all of the terms of the Crestwood preferred units, will remain unchanged.

 

Q:

If I am a Crestwood unitholder, will I receive distributions in the future?

 

A:

Before completion of the merger, Crestwood expects to pay quarterly distributions on Crestwood common units and Crestwood preferred units, which currently are $0.655 per Crestwood common unit and $0.21111 per Crestwood preferred unit, at times and intervals consistent with its prior practice and as permitted by the merger agreement. In addition, if Crestwood and Energy Transfer mutually agree that closing is reasonably expected to occur before the ex-dividend date of Energy Transfer’s regular quarterly distribution for the quarter ending December 31, 2023, Crestwood may pay a distribution (other than and in addition to regular quarterly distributions) to the Crestwood unitholders in an amount not to exceed $0.003 per Crestwood common unit and $0.0003 per Crestwood preferred unit (the “Pre-Merger Special Distribution”). Further, if you are a Crestwood preferred unitholder and elect to convert your Crestwood preferred units into Crestwood common units or have your Crestwood preferred units redeemed in connection with the merger, you will be entitled to accrued and unpaid distributions through the effective date of conversion or the date of redemption, as applicable. Your receipt of this quarterly distribution will not reduce the per unit common unit merger consideration. Once the merger is completed, to the extent Crestwood common units are exchanged for ET common units, when distributions are declared by the board of directors of LE GP, LLC (the “ET board of directors”), the general partner of Energy Transfer (“ET GP”), and paid by Energy Transfer, former Crestwood unitholders will receive distributions on ET common units that they receive in the merger in accordance with the Third Amended and Restated Agreement of Limited Partnership of Energy Transfer (the “Energy Transfer Partnership Agreement”).

For a description of the distribution provisions of the Energy Transfer Partnership Agreement, please read “Comparison of Rights of Energy Transfer Common Unitholders, New ET Preferred Unitholders, Crestwood Common Unitholders and Crestwood Preferred Unitholders” beginning on page 152.

 

Q:

What vote of unitholders is required to approve and adopt the merger agreement?

 

A:

The merger proposal must be approved and adopted by the affirmative vote of the holders of a majority of the outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class. Because approval is based on the affirmative vote of holders of at least a majority of the outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class, a Crestwood unitholder’s failure to vote, an abstention from voting or the failure of a Crestwood unitholder who holds his or her units in “street name” through a bank, broker or other nominee to give voting instructions to such bank, broker or other nominee (a “broker non-vote”) will have the same effect as a vote “AGAINST” approval of the merger proposal.

 

Q:

What vote of unitholders is required to approve the other matters to be considered at the special meeting?

 

A:

Approval of the advisory compensation proposal requires the affirmative vote of the holders of a majority of the Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single

 

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  class. The vote of Crestwood unitholders on the advisory compensation proposal is advisory in nature and will not be binding on Energy Transfer or the Crestwood board of directors and will not affect whether the compensation is paid. Any failure to vote, abstention or broker non-votes will have the same effect as a vote “AGAINST” the advisory compensation proposal.

Any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal requires the affirmative vote of the holders of a majority of the Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class, present online or by proxy at the special meeting. No notice of the adjourned special meeting will be given so long as the time and place to which the special meeting is adjourned are announced at the special meeting at which the adjournment is taken, the adjournment is for no more than 45 days, a new record date is not fixed and, at the adjourned special meeting, only such business is transacted as might have been transacted at the original special meeting. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. Broker non-votes will have no effect on the adoption of the adjournment proposal.

 

Q:

Who counts the votes?

 

A:

We have engaged Broadridge Investor Communication Solutions as our independent agent, to receive and tabulate votes at the special meeting. A representative of Broadridge Investor Communication Solutions will separately tabulate “FOR,” “AGAINST” or “ABSTAIN” votes, as applicable. A representative of Broadridge Investor Communication Solutions has also been retained to be our election inspector to certify the results, determine the existence of a quorum and the validity of proxies, and perform any other acts required under the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”) or the Crestwood Partnership Agreement.

 

Q:

What constitutes a quorum for the special meeting?

 

A:

A quorum shall consist of the holders of record of a majority of the issued and outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, present online or by proxy at the special meeting. Abstentions will be counted for purposes of determining whether there is a quorum at the special meeting. Because it is expected that all of the matters to be voted on at the special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your bank, broker or other nominees, your units will not count towards determining whether a quorum is present and your units will not be voted on any of the proposals.

 

Q:

When and where will the special meeting be held?

 

A:

The virtual special meeting is scheduled to be held at www.virtualshareholdermeeting.com/CEQP2023SM on                 , 2023 at                 a.m., central time.

The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/CEQP2023SM, where Crestwood unitholders will be able to participate and vote online. Crestwood encourages its unitholders to access the meeting 15 minutes prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this proxy statement/prospectus. This proxy statement/prospectus is first being furnished to Crestwood’s unitholders on or about                 , 2023.

 

Q:

What is required to participate in the special meeting?

 

A:

To be admitted to the special meeting at www.virtualshareholdermeeting.com/CEQP2023SM, unitholders must enter the 16-digit control number found on their proxy card or voting instruction form. Once properly admitted to the special meeting, unitholders of record as of the record date may vote their units by following the instructions available on the meeting website during the meeting and may also view the complete list of unitholders entitled to vote at the special meeting. Technical support will be available on the virtual meeting website beginning 15 minutes prior to the start of the special meeting. The technical support offered through

 

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  this service is designed to address difficulties related to the virtual meeting website, and it is recommended that you contact your bank, broker or other nominee should you be unable to locate your 16-digit control number.

Crestwood unitholders may submit questions during the special meeting. As part of the special meeting, Crestwood will hold a live question and answer session during which we intend to answer questions submitted during the meeting in accordance with the special meeting procedures which are pertinent to Crestwood and the meeting matters, as time permits. Questions may be submitted during the special meeting through www.virtualshareholdermeeting.com/CEQP2023SM. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

All Crestwood unitholders who hold Crestwood common units or Crestwood preferred units at the close of business on the record date,                 , 2023, are entitled to receive notice of and to vote at the special meeting and any adjournment or postponement thereof.

 

Q:

How do I vote at the special meeting?

 

A:

All unitholders of record may vote online during the special meeting. Street name holders may vote online during the special meeting if they have a voting instruction form with a 16-digit control number, as described below. You may cast your vote electronically during the special meeting using the 16-digit control number found on your proxy card or voting instruction form. If you hold Crestwood common units or Crestwood preferred units through a bank or broker, and you have not received a 16-digit control number, please contact your bank, broker or other nominee as soon as possible so that you can be provided with a 16-digit control number.

Whether you plan to attend the special meeting or not, we encourage you to vote by proxy as soon as possible.

 

Q:

How important is my vote as a Crestwood unitholder?

 

A:

Your vote “FOR” each proposal presented at the special meeting is very important, and you are encouraged to submit a proxy as soon as possible. The merger cannot be completed without the approval of the merger proposal by Crestwood unitholders.

 

Q:

How many votes do I have for the special meeting?

 

A:

Each Crestwood common unitholder is entitled to one vote for each Crestwood common unit held of record as of the close of business on the record date for each proposal. Each Crestwood preferred unitholder is entitled to a number of votes equal to the number of votes such holder would have had if all Crestwood preferred units held by such holder had been converted into Crestwood common units as of the record date. As of the date hereof, the Crestwood preferred units are convertible into Crestwood common units on a 10-for-1 basis. As a result, each Crestwood preferred unitholder will have one vote for every ten Crestwood preferred units held as of the record date.

 

Q:

If my Crestwood common units or Crestwood preferred units are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee vote my units without instructions from me?

 

A:

No. Your bank, broker or other nominee will not be able to vote your Crestwood common units or Crestwood preferred units without instructions from you. Please follow the procedure your bank, broker or other nominee provides to vote your units. Under the rules of the NYSE, your bank, broker or other nominee

 

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  will only be permitted to vote your Crestwood common units or Crestwood preferred units on “non-routine” matters if you instruct your bank, broker or other nominee how to vote. All of the proposals scheduled for consideration at the special meeting are “non-routine” matters. As a result, if you fail to provide voting instructions to your bank, broker or other nominee, your Crestwood common units or Crestwood preferred units will not be counted as present at the special meeting for purposes of determining a quorum and will not be voted on any of the proposals. To make sure that your Crestwood common units or Crestwood preferred units are voted on each of the proposals, you should instruct your bank, broker or other nominee how you wish to vote your Crestwood common units or Crestwood preferred units in accordance with the procedures provided by your bank, broker or other nominee regarding the voting of your Crestwood common units or Crestwood preferred units.

 

Q:

If I am planning on virtually attending the special meeting, should I still submit a proxy?

 

A:

Yes. Whether or not you plan to virtually attend the special meeting, you should submit a proxy. Crestwood common units and Crestwood preferred units will not be voted if the holder of such units does not submit a proxy and then does not vote online at the special meeting.

 

Q:

What do I do if I want to change my vote?

 

A:

If you are a holder of record, you may change your vote at any time before Crestwood common units and Crestwood preferred units are voted at the special meeting. You can do this in any of the three following ways:

 

   

by sending a written notice to the Corporate Secretary of Crestwood in time to be received before the special meeting stating that you revoke your proxy;

 

   

by completing, signing and dating another proxy card and returning it by mail in time to be received before the special meeting or by submitting a later dated proxy by telephone or the internet, in which case your later-submitted proxy will be recorded and your earlier proxy revoked; or

 

   

if you are a holder of record, or if you hold a proxy in your favor executed by a holder of record, by virtually attending the special meeting and voting online.

If your Crestwood common units or Crestwood preferred units are held in an account at a bank, broker or other nominee, you should contact your bank, broker or other nominee to change your vote.

 

Q:

What should I do if I receive more than one set of voting materials for the special meeting?

 

A:

You may receive more than one set of voting materials for the special meeting and the materials may include multiple proxy cards or voting instruction forms. For example, you will receive a separate voting instruction form for each brokerage account in which you hold units. If you are a holder of record registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction form that you receive according to the instructions on it to ensure that all of your units are voted.

 

Q:

Can I submit my proxy by telephone or the internet?

 

A:

Yes. In addition to mailing your proxy, you may submit it telephonically or on the internet. Instructions for using the telephone or internet to vote are described on your proxy card. For further information, please see the section titled “Special Meeting of Crestwood Unitholders—How to Submit Your Proxy” beginning on page 45.

 

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Q:

How will my Crestwood common units or Crestwood preferred units be voted if I return a blank proxy?

 

A:

If you sign, date and return your proxy card and do not indicate how you want your Crestwood common units or Crestwood preferred units to be voted, then your Crestwood common units or Crestwood preferred units will be voted “FOR” the merger proposal, “FOR” the advisory compensation proposal and “FOR” the adjournment proposal.

 

Q:

How do I exchange my Crestwood common units for common unit merger consideration?

 

A:

As soon as reasonably practicable following the effective time of the merger, the exchange agent appointed by Energy Transfer and Crestwood will mail to each Crestwood common unitholder (whose units were cancelled and converted into the right to receive the common unit merger consideration) (i) a letter of transmittal and (ii) instructions for use in effecting the surrender of the Crestwood common units in exchange for ET common units (which will be issued in book-entry form) and cash in lieu of any fractional ET common units. You should read these instructions carefully. Assuming that you complete and submit the letter of transmittal in accordance with its instructions and surrender your Crestwood common units for cancellation, you will not need to take any further action in order to receive the common unit merger consideration.

 

Q:

How do I exchange my Crestwood preferred units for the elected form of consideration?

 

A:

An election form (the “Preferred Election Form”) will be mailed to each holder of record of Crestwood preferred units as of the close of business on the fifth business day (the “Election Form Record Date”) before the mailing date, which will be on or about 30 days prior to the expected closing date (the “Mailing Date”). The election deadline will be a date that is agreed upon between Energy Transfer and Crestwood, near to two business days prior to the closing date (the “Election Deadline”). Energy Transfer and Crestwood will cooperate to issue a joint press release specifying the date of the Election Deadline not more than 15 business days before, and at least five business days prior to, the Election Deadline. Crestwood will also make an election form available to any person that becomes a holder of Crestwood preferred units between the Election Form Record Date and the Election Deadline upon request by that person. Unless the Crestwood preferred unitholders desire to make the default election, they should return their completed Preferred Election Form (accompanied by duly executed transmittal materials included in the Preferred Election Form), along with the Crestwood preferred unit certificate(s) to which the Preferred Election Form relates (or a properly completed notice of guaranteed delivery) unless the units are held in book entry form, according to the instructions included with the form to the exchange agent by no later than the Election Deadline. The Preferred Election Form will also include such other instructions and provisions that Energy Transfer and Crestwood agree are necessary or useful for effecting the surrender of the Crestwood preferred units in exchange for the elected form of consideration. The Preferred Election Form will be provided to Crestwood preferred unitholders in a separate mailing and is not being provided with this proxy statement/prospectus.

If you own Crestwood preferred units in “street name” through a bank, broker or other nominee, you should follow the instructions of the bank, broker or other nominee for making an election with respect to your units. Unless the Crestwood preferred unitholders desire to make the default election, they should return their completed Preferred Election Form to the exchange agent by no later than the Election Deadline.

 

Q:

Can I change or revoke my election as to the form of consideration I receive in exchange for my Crestwood preferred units?

 

A:

Yes. Crestwood preferred unitholders can change their election as to the form of consideration they wish to receive by written notice received by the exchange agent prior to the Election Deadline accompanied by a

 

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  new Preferred Election Form. For a new Preferred Election Form to be effective, the exchange agent must receive your new Preferred Election Form before the Election Deadline. Crestwood preferred unitholders can revoke their election as to the form of preferred consideration they wish to receive by written notice received by the exchange agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of such holder’s certificates, or of the guarantee of delivery of such certificates, previously deposited with the exchange agent. All Preferred Election Forms shall automatically be revoked if the exchange agent is notified in writing by Crestwood or Energy Transfer that the merger has been abandoned and that the merger agreement has been terminated. If a Preferred Election Form is revoked, the certificate(s) (or guarantees of delivery, as appropriate), if any, for the Crestwood preferred units to which such Preferred Election Form relates shall be promptly returned to the holder of the Crestwood preferred units submitting the same to the exchange agent.

 

Q:

What happens if I fail to return a properly completed Preferred Election Form by the Election Deadline?

 

A:

If a Crestwood preferred unitholder does not return a properly completed Preferred Election Form by the Election Deadline (accompanied by duly executed transmittal materials included in the election form), together with, if applicable, Crestwood preferred unit certificate(s) to which the election form relates or an appropriate guarantee of delivery of the Crestwood preferred unit certificate(s), such Crestwood preferred unitholder will be treated as though such person made the default election, and will receive new ET preferred units for their Crestwood preferred units.

 

Q:

Can I sell my Crestwood preferred units after I make my election?

 

A:

Yes, but after an election is validly made with respect to your Crestwood preferred units, you will not be able to transfer the Crestwood preferred units unless you revoke your election before the Election Deadline by providing written notice to the exchange agent. In the time between the Election Deadline and the closing of the merger, the trading price of Crestwood preferred units may change, and you might otherwise want to sell your Crestwood preferred units to gain access to cash, make other investments, or reduce the potential for a decrease in the value of your investment. The date that you will receive your elected form of consideration in exchange for your Crestwood preferred units depends on the completion date of the merger, which is uncertain. The completion date of the merger might be later than expected due to events not within the control of Crestwood or Energy Transfer, such as delays in obtaining regulatory approvals.

 

Q:

How will I receive the common unit merger consideration and preferred consideration to which I am entitled?

 

A:

You will be paid the common unit merger consideration and preferred consideration to which you are entitled upon the surrender to the exchange agent of your Crestwood common units or Crestwood preferred units, as applicable, and a duly completed and validly executed letter of transmittal. Crestwood preferred unitholders will also be required to deliver a completed Preferred Election Form to the exchange agent. More information on the documentation you are required to deliver to the exchange agent may be found under the section titled “Proposal 1: The Merger—Exchange of Units” beginning on page 87. Any ET common units or new ET preferred units that you receive in the merger will be issued in book-entry form and you will receive cash in lieu of any fractional ET common units. No interest will be paid or will accrue on any cash amounts received as common unit merger consideration or preferred consideration, as applicable, or in lieu of any fractional ET common units.

 

Q:

What happens if I sell my Crestwood common units or Crestwood preferred units after the record date but before the special meeting?

 

A:

The record date of the special meeting is earlier than the date of the special meeting and the date that the merger is expected to be completed. If you transfer your Crestwood common units or Crestwood preferred

 

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  units after the record date but before the date of the special meeting, you will retain your right to vote at the special meeting, but you will not have the right to receive the common unit merger consideration or preferred consideration to be received by Crestwood unitholders in the merger, as applicable. In order to receive the common unit merger consideration or preferred consideration, you must hold your units through the completion of the merger.

 

Q:

What are the expected U.S. federal income tax consequences to a Crestwood unitholder as a result of the merger?

 

A:

Generally, (i) Crestwood common unitholders should not recognize gain or loss solely as a result of the receipt of ET common units and (ii) Crestwood preferred unitholders should not recognize gain or loss solely as a result of the receipt of new ET preferred units or ET common units. However, Crestwood unitholders may recognize gain or loss in certain specific situations, including (i) with respect to any deemed distributions made to a Crestwood unitholder as a result of a net decrease in such unitholder’s share of nonrecourse liabilities as a result of the merger, (ii) the receipt of cash in lieu of fractional ET common units or (iii) to the extent contributions of cash or other property to Crestwood on or after the date of the Merger Agreement and prior to the effective time of the merger are treated as part of a “disguised sale” of property.

Crestwood preferred unitholders who properly make a Redemption Election with respect to part or all of their Crestwood preferred units will receive as consideration for such Crestwood preferred units, at the sole discretion of Crestwood GP, Crestwood common units or cash at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $                 per preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption. Crestwood preferred unitholders that receive Crestwood common units pursuant to a Redemption Election should, to the extent they receive ET common units, have tax consequences consistent with those applicable to the Crestwood common unitholders discussed above. Crestwood preferred unitholders that receive cash pursuant to a Redemption Election should be treated as selling the applicable Crestwood preferred units immediately prior to the merger and, as a result, should recognize gain or loss equal to the difference between the amount realized and such Crestwood preferred unitholder’s tax basis in the Crestwood preferred units sold. A Crestwood preferred unitholder’s amount realized is equal to the sum of the amount of cash received by such Crestwood preferred unitholder (plus the applicable portion of such Crestwood preferred unitholder’s share of Crestwood’s nonrecourse liabilities immediately prior to the merger, which is expected to be zero).

The amount and effect of any gain or loss that may be recognized by a Crestwood unitholder will depend on such unitholder’s particular situation, including the ability of such Crestwood unitholder to utilize any suspended passive losses.

For a more detailed discussion of the material U.S. federal income tax consequences of the merger to Crestwood unitholders, please see the section titled “Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q:

What are the expected U.S. federal income tax consequences to a Crestwood unitholder of ownership of ET common units and new ET preferred units?

 

A:

Each Crestwood unitholder who becomes an ET common unitholder as a result of the merger will, as is the case for existing ET common unitholders, be allocated such holder’s distributive share of Energy Transfer’s income, gains, losses, deductions and credits. In addition to U.S. federal income taxes, such holder may be subject to other taxes, including state and local income taxes, unincorporated business taxes, and estate, inheritance or intangibles taxes that may be imposed by the various jurisdictions in which Energy Transfer conducts business or owns property following the merger or in which the holder is a resident.

 

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Energy Transfer will treat Crestwood unitholders who receive new ET preferred units as partners and distributions on the new ET preferred units as distributions to a partner. Energy Transfer intends to treat new ET preferred unitholders as receiving an allocable share of gross income from Energy Transfer equal to their cash distributions, to the extent Energy Transfer has sufficient gross income to make such allocations of gross income. In the event there is not sufficient gross income to match such distributions, the distributions on the new ET preferred units would reduce the capital accounts of the new ET preferred units, requiring a subsequent allocation of income or gain to provide the new ET preferred units with their liquidation preference, if possible.

For a more detailed discussion of the material U.S. federal income tax consequences of ET unit ownership following the merger, please see the section titled “Material U.S. Federal Income Tax Consequences of ET Unit Ownership.”

 

Q:

Upon completion of the merger, how many Schedules K-1 will I receive if I receive ET units in the merger?

 

A:

If you are a Crestwood unitholder, you will receive two Schedules K-1 for the year in which the merger is completed: one from Crestwood, which will describe your share of Crestwood’s income, gain, loss and deduction for the portion of the tax year that you held Crestwood units prior to the effective time, and one from Energy Transfer, which will describe your share of Energy Transfer’s income, gain, loss and deduction for the portion of the tax year that you held ET units following the effective time.

Crestwood expects to furnish a Schedule K-1 to each holder of Crestwood units within 90 days of the end of the calendar year. Energy Transfer also expects to furnish a Schedule K-1 to each holder of ET units within 90 days of the end of the calendar year.

 

Q:

Do I have appraisal or dissenters’ rights?

 

A:

No. Crestwood unitholders do not have appraisal or dissenters’ rights in connection with the merger under Delaware law or the Crestwood Partnership Agreement.

 

Q:

Is completion of the merger subject to any conditions?

 

A:

Yes. The merger is subject to a number of conditions to closing as specified in the merger agreement. These closing conditions include, among others, (i) approval of the merger proposal by Crestwood unitholders, (ii) the absence of any legal order preventing consummation of the merger, (iii) the expiration or termination of any waiting period under the HSR Act (as defined below), (iv) receipt of legal opinions regarding certain tax-related matters, (v) the absence of a material adverse effect on Energy Transfer or Crestwood, (vi) the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, has been declared effective under the Securities Act and no stop order suspending the effectiveness of the registration statement has been issued by the SEC, nor have proceedings seeking a stop order been initiated or threatened by the SEC and (vii) the satisfaction or, to the extent permitted by applicable law, waiver of the other conditions specified in the merger agreement. For additional information on these conditions, please read the section titled “The Merger Agreement—Conditions to the Merger” beginning on page 93.

 

Q:

When do you expect to complete the merger?

 

A:

Energy Transfer and Crestwood are working to complete the merger as promptly as practicable. Energy Transfer and Crestwood currently expect to complete the merger in the fourth quarter of 2023, subject to the receipt of Crestwood unitholder approval, regulatory approvals and the satisfaction of other usual and customary closing conditions. However, no assurance can be given as to when, or whether, the merger will occur.

 

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Q:

What happens if the merger is not completed?

 

A:

If the Crestwood unitholders do not approve and adopt the merger agreement or if the merger is not completed for any other reason, Crestwood unitholders will not receive any consideration or payment for their Crestwood common units or Crestwood preferred units, as applicable, in connection with the merger. Instead, Crestwood would remain an independent limited partnership and Crestwood common units and Crestwood preferred units would continue to be listed and traded on the NYSE. Under specified circumstances, Crestwood may be required to pay Energy Transfer a breakup fee of $96.0 million as described in the section titled “The Merger Agreement—Breakup Fee” beginning on page 113.

 

Q:

What happens if the advisory compensation proposal merger is not approved by Crestwood unitholders?

 

A:

This vote is advisory and non-binding, and the merger is not conditioned or dependent upon the approval of the advisory compensation proposal by Crestwood unitholders. However, Crestwood and Energy Transfer value the opinions of Crestwood unitholders, and Energy Transfer expects to consider the outcome of the vote, along with other relevant factors, when considering future executive compensation, assuming the merger is completed. Because the executive compensation to be paid in connection with the merger is based on the terms of the merger agreement as well as the contractual arrangements between Crestwood GP or its affiliates and its named executive officers, subject to the contractual conditions applicable thereto, such compensation will be payable, regardless of the outcome of this advisory vote if the merger proposal is approved. However, Crestwood seeks the support of its unitholders and believes that unitholder support is appropriate because Crestwood GP has a comprehensive executive compensation program designed to link the compensation of its named executive officers with Crestwood’s performance and the interests of Crestwood unitholders.

 

Q:

Is the merger conditioned on Crestwood obtaining the requisite consents in the Preferred Consent Solicitation?

 

A:

No. The merger is not conditioned upon Crestwood obtaining the requisite consents to amend the terms of the Crestwood Partnership Agreement in the Preferred Consent Solicitation. However, if the requisite consents are obtained in the Preferred Consent Solicitation, such amendments to the Crestwood Partnership Agreement will not be adopted unless the conditions to the closing of the merger have been satisfied or waived, as applicable, by Energy Transfer and/or Crestwood. If the requisite consent in the Preferred Consent Solicitation is not obtained, the current terms of the Crestwood Partnership Agreement, including all of the terms of the Crestwood preferred units, will remain unchanged.

 

Q:

Where can Crestwood preferred unitholders find more information regarding the Preferred Consent Solicitation?

 

A:

A summary of the Preferred Consent Solicitation can be found in the section of this proxy statement/prospectus entitled “Preferred Consent Solicitation.” However, for additional information, Crestwood preferred unitholders should read the Crestwood Consent Solicitation Statement, which was filed by Crestwood with the SEC on                , 2023 and mailed to Crestwood preferred unitholders on or about the same date.

 

Q:

Are there any risks in the merger that I should consider?

 

A:

Yes. There are risks associated with all business combinations, including the merger. Before making any decision on how to vote, Energy Transfer and Crestwood urge you to read carefully and in its entirety the section titled “Risk Factors” beginning on page 28 of this document. You also should read and carefully consider the risk factors relating to Energy Transfer and Crestwood contained in the documents that are

 

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  incorporated by reference into this document, including Energy Transfer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and Crestwood’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as updated from time to time in each company’s subsequent filings with the SEC.

 

Q:

Who can I contact with questions about the special meeting or the merger and related matters?

 

A:

If you have any questions about the merger and the other matters contemplated by this document or how to submit your proxy or voting instruction form or if you need additional copies of this document or the enclosed proxy card or voting instruction form, you should contact Crestwood’s proxy solicitor, Innisfree M&A Incorporated. Crestwood unitholders may call toll free at (877) 750-0854. Banks and brokers may call collect at (212) 750-5833. You may also contact Crestwood, Attention: Investor Relations, 811 Main Street, Suite 3400, Houston, Texas 77002, telephone: (832) 519-2200.

Crestwood unitholders may submit questions during the special meeting. As part of the special meeting, Crestwood will hold a live question and answer session during which we intend to answer questions submitted during the meeting in accordance with the special meeting procedures which are pertinent to Crestwood and the meeting matters, as time permits. Questions may be submitted during the special meeting through www.virtualshareholdermeeting.com/CEQP2023SM. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once.

 

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SUMMARY

This summary highlights selected information from this document. You are urged to carefully read the entire document and the other documents referred to and incorporated in this document because the information in this section does not provide all the information that might be important to you with respect to the merger agreement, the merger and the other matters being considered at the special meeting. See “Where You Can Find More Information.” Each item in this summary refers to the page of this document on which that subject is discussed in more detail.

Information About the Companies (See page 40)

Energy Transfer LP is a publicly-traded Delaware limited partnership owning and operating a diversified portfolio of energy assets. Energy Transfer’s core operations include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, natural gas liquids (“NGLs”) and refined product transportation and terminalling assets; and NGL storage and fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as limited partner interests in and the general partner interests of the publicly-traded master limited partnerships, Sunoco LP and USA Compression Partners, LP.

Crestwood Equity Partners LP, a Delaware limited partnership formed in March 2001, is a master limited partnership that develops, acquires, owns or controls, and operates primarily-fee based assets and operations within the energy midstream sector. Headquartered in Houston, Texas, Crestwood provides broad-ranging infrastructure solutions across the value chain to service premier liquids-rich natural gas and crude oil shale plays across the United States. Crestwood owns and operates a diversified portfolio of NGL, crude oil, natural gas and produced water gathering, processing, storage, disposal and transportation assets that connect fundamental energy supply with energy demand across North America. Crestwood’s common units representing limited partner interests are listed on the NYSE under the symbol “CEQP” and its preferred units representing limited partner interests are listed on the NYSE under the symbol “CEQP-P.”

Pachyderm Merger Sub LLC is a Delaware limited liability company and wholly owned subsidiary of Energy Transfer. Merger Sub has not carried on any activities to date, other than activities incidental to its formation or undertaken in connection with the transactions contemplated by the merger agreement.

The Merger (See page 49)

Energy Transfer and Crestwood have entered into a merger agreement, pursuant to which Energy Transfer will acquire Crestwood, and Crestwood will cease to be a publicly held limited partnership. Upon the terms and subject to the conditions set forth in the merger agreement, at the effective time, Crestwood will merge with and into Merger Sub, with Merger Sub continuing as the surviving entity and a wholly owned subsidiary of Energy Transfer. Crestwood GP’s general partner interest in Crestwood will be automatically cancelled and cease to exist without any conversion thereof and no consideration will be received therefor.

The merger agreement is attached as Annex A to this document, and both Energy Transfer and Crestwood encourage you to read it carefully and in its entirety because it is the legal document that governs the merger.

Common Unit Merger Consideration and Preferred Consideration (See page 91)

If the merger is completed, Crestwood unitholders will receive, for each Crestwood common unit they own as of immediately prior to the effective time, 2.07 ET common units.

In accordance with the Crestwood Partnership Agreement, each Crestwood preferred unit outstanding immediately prior to the effective time will, at the election of the Crestwood preferred unitholder, in accordance

 

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with the Crestwood Partnership Agreement, (i) convert into Crestwood common units, at the then-applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time, (ii) convert into new ET preferred units or (iii) be redeemed in exchange for cash or Crestwood common units, at the sole discretion of Crestwood GP, at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $                 per Crestwood preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption.

Crestwood preferred unitholders that receive Crestwood common units pursuant to the foregoing clauses (i) or (iii) will be entitled to receive the common unit merger consideration at the effective time. If no election is made by a holder of Crestwood preferred units, such holder will be deemed to have elected to receive new ET preferred units. Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have elected to have such Crestwood preferred units redeemed pursuant to a Redemption Election as described in clause (iii) above.

No fractional ET common units will be issued. Former Crestwood unitholders to whom fractional ET common units would have otherwise been issued will be entitled to receive, subject to applicable withholding, a cash payment equal to such unitholders’ proportionate interest in the net proceeds from the sale of the aggregated fractional ET common units that would have been issued in the merger.

Election Form (See page 91)

Crestwood’s exchange agent for the merger will mail a Preferred Election Form on the Mailing Date to holders of record of Crestwood preferred units as of the Election Form Record Date, being the close of business on the fifth business day prior to the Mailing Date, together with instructions for electing the desired form of consideration. The exchange agent will also make available an election form to all persons who become record or beneficial holders of Crestwood preferred units between the Election Form Record Date and the Election Deadline, upon the reasonable request of those persons.

The “Election Deadline” will be a date that is agreed between Energy Transfer and Crestwood to be near to two business days prior to the closing date, and publicly announced by joint press release at least five and no more than 15 business days prior to the Election Deadline.

Crestwood preferred unitholders wishing to make an election must properly complete and deliver to the exchange agent a Preferred Election Form by the Election Deadline, accompanied by duly executed transmittal materials included in the Preferred Election Form, along with, if their Crestwood preferred units are not held in book-entry form, their Crestwood preferred unit certificates (or a properly completed notice of guaranteed delivery). The Preferred Election Form will also include delivery instructions with respect to book-entry Crestwood preferred units. Crestwood preferred unitholders should NOT send in their Crestwood preferred unit certificates with their proxy card.

Once Crestwood preferred unitholders have tendered their Crestwood preferred unit certificates to the exchange agent, they may not transfer their Crestwood preferred units represented by those certificates until the merger is completed, unless they revoke their election by written notice to the exchange agent that is received prior to the Election Deadline. If the merger is not completed and the merger agreement is terminated, Crestwood preferred unit certificates will be returned by the exchange agent.

If Crestwood preferred unitholders fail to submit a properly completed Preferred Election Form, accompanied by duly executed transmittal materials included in the election form, together with their Crestwood preferred unit certificates (or a properly completed notice of guaranteed delivery), if any, prior to the Election

 

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Deadline, they will be deemed to have made the default election, and will receive new ET preferred units for their Crestwood preferred units.

For more information, see “The Merger—Common Unit Merger Consideration and Preferred Consideration—Preferred Election Procedures” beginning on page 91 of this proxy statement/prospectus.

Treatment of Crestwood Equity Awards (See page 78)

In the merger, each Crestwood restricted unit will be entitled to receive the common unit merger consideration. The vesting restrictions applicable to each Crestwood restricted unit that has a grant date prior to January 1, 2023 will lapse immediately prior to the effective time. For all other Crestwood restricted units, the same restrictions and other terms and conditions that were applicable immediately prior to the effective time will continue to apply after the effective time.

Each Crestwood performance unit that has a grant date prior to January 1, 2023 or that is otherwise vested at the effective time will be cancelled at the effective time in exchange for (i) the common unit merger consideration in respect of the corresponding number of Crestwood common units (including any reinvested distribution equivalent rights) issuable pursuant to such Crestwood performance unit based upon the attainment of the applicable Crestwood performance assumption (as described below) and (ii) an amount in cash equal to any accrued but unpaid cash distribution equivalents with respect to such Crestwood performance units. All other Crestwood performance units will be assumed by Energy Transfer and converted into a time-based phantom unit award representing a contractual right upon vesting to receive a number of ET common units equal to the product obtained by multiplying (i) the number of Crestwood common units subject to such assumed performance unit award immediately prior to the effective time assuming attainment of the applicable Crestwood performance assumption by (ii) the exchange ratio. Each assumed performance unit award will otherwise be subject to the same terms and conditions that were applicable to the corresponding Crestwood performance unit immediately prior to the effective time other than the performance-based vesting conditions and, in the event any distribution is declared in respect of ET common units, the corresponding distribution equivalent right for each assumed performance unit award will be settled within 30 days following the time when distributions are paid to ET common unitholders generally. The “Crestwood performance assumptions” are as follows: (A) with respect to a Crestwood performance unit granted prior to January 1, 2023, a performance multiplier of 100%, and (B) with respect to a Crestwood performance unit granted on or after January 1, 2023, the target level of performance for the relevant Crestwood restricted unit, Crestwood performance unit or Crestwood phantom unit, as applicable.

Treatment of Crestwood Indebtedness (See page 111)

As of June 30, 2023, Crestwood had had $417.4 million of borrowings outstanding under that certain Third Amended and Restated Credit Agreement, dated as of December 20, 2021, as amended from time to time, among Crestwood Midstream Partners LP, as borrower, the guarantors from time to time party thereto, the lenders from time to time party thereto, Wells Fargo Bank, National Association, as administrative agent and collateral agent, and Capital One, National Association, Citizens Bank, N.A., Morgan Stanley Senior Funding, Inc., MUFG Bank Ltd. and Regions Bank, as co-documentation agents (the “Crestwood Credit Agreement”).

The merger agreement requires Crestwood to deliver to Energy Transfer, prior to the closing date, an executed payoff letter with respect to the indebtedness and obligations of Crestwood and its subsidiaries under the Crestwood Credit Agreement. In connection with the merger, Energy Transfer will pay or cause to be paid the amounts set forth in such payoff letter. As of June 30, 2023, Crestwood Midstream Partners LP (the “Operating Company”) had approximately $2.85 billion in senior notes outstanding (the “Crestwood Senior Notes”). In connection with the merger, Energy Transfer will assume the Crestwood Senior Notes. For a description of the Crestwood Credit Agreement and the Crestwood Senior Notes, see Crestwood’s Annual Report

 

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on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 27, 2023 and Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023, filed with the SEC on August 3, 2023, which are incorporated by reference into this proxy statement/prospectus.

Preferred Consent Solicitation (See page 47)

Separately from the solicitation of votes pursuant to the accompanying proxy statement/prospectus, at the direction of Energy Transfer pursuant to certain provisions of the merger agreement (see “The Merger Agreement—Other Covenants and Agreements”), Crestwood is also soliciting consents from Crestwood preferred unitholders to amend certain terms of the Crestwood Partnership Agreement relating to the Crestwood preferred units proposed by Energy Transfer pursuant to the merger agreement. Such consent solicitation is being conducted by Crestwood pursuant to a proxy statement on Schedule 14A filed by Crestwood with the SEC on                 , 2023 and mailed to the Crestwood preferred unitholders on or about the same date and which more fully describes the proposed amendments to the Crestwood Partnership Agreement. If the requisite consents are obtained in the Preferred Consent Solicitation, the adoption of such amendments will be conditioned on the satisfaction or waiver of the conditions to the closing of the merger. If such amendments are adopted (i) the terms of any new ET preferred units issued to the Crestwood preferred unitholders electing to receive such units in the merger will be substantially similar to the terms of the Crestwood preferred units as so amended and (ii) the redemption price payable to the Crestwood preferred unitholders who make a Redemption Election will be $                 per Crestwood preferred unit. A summary of the Preferred Consent Solicitation can be found in the section of this proxy statement/prospectus entitled “Preferred Consent Solicitation.” However, for additional information, Crestwood preferred unitholders should read the Crestwood Consent Solicitation Statement. The merger is not conditioned upon Crestwood obtaining the requisite consents to amend the terms of the Crestwood Partnership Agreement in the Preferred Consent Solicitation. If the requisite consent in the Preferred Consent Solicitation is not obtained, the current terms of the Crestwood Partnership Agreement, including all of the terms of the Crestwood preferred units, will remain unchanged.

Risk Factors (See page 28)

The merger is, and upon the completion of the merger, the combined company will be, subject to a number of risks. Some of these risks include, but are not limited to, those described below and in more detail under the heading “Risk Factors” beginning on page 28. You should carefully read and consider these risks in deciding whether to vote for the approval and adoption of the merger agreement and the transactions contemplated thereby.

Risks Related to the Merger

 

   

Because the exchange ratio is fixed, the number of ET common units to be received by Crestwood unitholders in connection with the merger will not change between now and the time the merger is completed to reflect changes in the trading prices of Crestwood common units or ET common units. Because the market price of ET common units will fluctuate prior to the consummation of the merger, Crestwood unitholders cannot be sure of the market value of ET common units that they will receive.

 

   

The merger is subject to various closing conditions, and any delay in completing the merger may reduce or eliminate the benefits expected and delay the payment of the common unit merger consideration or preferred consideration to Crestwood’s unitholders.

 

   

Certain executive officers and directors of Crestwood have interests in the merger that are different from, or in addition to, the interests of Crestwood unitholders generally, which could have influenced their decision to approve the merger agreement.

 

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Crestwood or Energy Transfer may waive one or more of the closing conditions without re-soliciting unitholder approval.

 

   

The merger agreement limits Crestwood’s ability to pursue alternatives to the merger.

 

   

Crestwood’s and Energy Transfer’s financial estimates are based on various assumptions that may not prove to be correct.

 

   

The opinion of Crestwood’s financial advisor will not reflect changes in circumstances between the signing of the merger agreement and the completion of the merger.

 

   

A different set of factors and conditions than those that affect Crestwood unitholders affect ET unitholders and could have a negative impact on the ET common unit price or new ET preferred unit price following the closing of the merger.

 

   

Crestwood unitholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

 

   

ET common units to be received by Crestwood unitholders as a result of the merger will have different rights from Crestwood common units and, if applicable, Crestwood preferred units.

 

   

The trading price and volume of ET common units, which Crestwood common unitholders will receive in connection with the merger, may be volatile following the merger.

 

   

If the merger agreement is terminated, under certain circumstances, Crestwood may be obligated to pay a breakup fee to Energy Transfer. This fee could require Crestwood to seek loans or use Crestwood’s available cash that would have otherwise been available for operations, distributions or other general partnership purposes.

 

   

The failure to successfully combine the businesses of Energy Transfer and Crestwood in the expected time frame may adversely affect Energy Transfer’s future results, which may adversely affect the value of the ET common units and new ET preferred units that Crestwood unitholders would receive in the merger.

 

   

If a governmental authority asserts objections to the merger, Energy Transfer and Crestwood may be unable to complete the merger or, in order to do so, Energy Transfer and Crestwood may be required to comply with material restrictions or satisfy material conditions.

 

   

The pendency of the merger could materially adversely affect the future business and operations of Crestwood or result in a loss of Crestwood employees.

 

   

Failure to complete the merger could negatively affect the price of Crestwood units and Crestwood’s future businesses and financial results.

 

   

Completion of the merger may trigger change in control or other provisions in certain agreements to which Crestwood is a party, which may have an adverse impact on Energy Transfer’s business and results of operations after the merger.

 

   

Crestwood unitholders are not entitled to appraisal or dissenters’ rights in connection with the merger.

 

   

If the merger, as well as the proposed amendments to the Crestwood Partnership Agreement are approved in the Preferred Consent Solicitation and become effective, such amendments may result in reduced liquidity for Crestwood preferred unitholders electing to receive new ET preferred units in the merger.

Tax Risks Related to the Merger

 

   

No ruling has been obtained with respect to the U.S. federal income tax consequences of the merger.

 

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The expected U.S. federal income tax consequences of the merger are dependent upon Energy Transfer and Crestwood being treated as partnerships for U.S. federal income tax purposes.

 

   

Crestwood unitholders could recognize taxable income, or gain or loss for U.S. federal income tax purposes, in certain circumstances, as a result of the merger.

Tax Risks Related to Owning ET Common Units and New ET Preferred Units Following the Merger

 

   

Certain tax consequences of the ownership of new ET preferred units are uncertain.

 

   

Energy Transfer, Crestwood, or certain subsidiaries of Crestwood may engage in transactions that cause former Crestwood unitholders to be subject to taxation in a different manner than other holders of ET units.

 

   

Holders of ET units received in the merger will generally be subject to the tax risks that apply to existing ET unitholders.

Special Meeting of Crestwood Unitholders (See page 41)

Date, time and place. The virtual special meeting will be held at www.virtualshareholdermeeting.com/CEQP2023SM on                 , 2023 at                  a.m. central time.

The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/CEQP2023SM, where Crestwood unitholders will be able to participate and vote online during the special meeting. Crestwood encourages its unitholders to access the meeting 15 minutes prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this proxy statement/prospectus. This proxy statement/prospectus is first being mailed to Crestwood’s unitholders on or about                 , 2023.

Proposals being considered. The special meeting is being held to consider and vote on the following proposals:

 

   

Proposal 1: to approve and adopt the merger agreement (attached as Annex A to this document) and the transactions contemplated thereby;

 

   

Proposal 2: to approve, on an advisory (non-binding) basis, specified compensation that may be received by Crestwood’s named executive officers in connection with the merger;

 

   

Proposal 3: any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the proposal to approve and adopt the merger agreement and the transactions contemplated thereby; and

 

   

Proposal 4: to transact such other business as may properly come before the special meeting and any adjournment or postponement thereof (at the present time, Crestwood knows of no other matters that will be presented for consideration at the special meeting).

Record Date; Voting Rights. The record date for the determination of Crestwood unitholders entitled to notice of and to vote at the special meeting is                 , 2023. Only Crestwood unitholders who held Crestwood common units and Crestwood preferred units of record at the close of business on                 , 2023, or proxy holders therefor, are entitled to vote at the special meeting and any adjournment or postponement of the special meeting. Each Crestwood common unitholder is entitled to one vote per Crestwood common unit. Each Crestwood preferred unitholder is entitled to a number of votes equal to the number of votes such holder would have had if all Crestwood preferred units held by such holder had been converted into Crestwood common units as of the record date. As of the date hereof, the Crestwood preferred units are convertible into Crestwood common units on a 10-for-1 basis. As a result, each Crestwood preferred unitholder will have one vote for every ten Crestwood preferred units held as of the record date.

 

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Quorum. A “quorum” shall consist of the holders of record of a majority of the issued and outstanding Crestwood common units, including the Crestwood preferred units, on an as-converted basis, present online or by proxy at the special meeting. There must be a quorum for the special meeting to be held.

Vote Required. The vote required for each proposal are as follows:

 

   

Proposal 1 – the merger proposal. The affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class, is required to approve the merger proposal. The failure of any Crestwood unitholder to submit a vote (e.g., by not submitting a proxy or not voting online), broker non-votes and any abstention by a Crestwood unitholder will have the same effect as a vote “AGAINST” approval of the merger proposal.

 

   

Proposal 2 – the advisory compensation proposal. The affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class, is required to approve the advisory compensation proposal. The failure of any Crestwood unitholder to submit a vote (e.g., by not submitting a proxy or not voting online), broker non-votes and any abstention by a Crestwood unitholder will have the same effect as a vote “AGAINST” approval of the advisory compensation proposal.

 

   

Proposal 3 – the adjournment proposal. The affirmative vote of the holders of a majority of the outstanding Crestwood common units and the outstanding Crestwood preferred units, on an as-converted basis, voting as a single class, present online or by proxy at the special meeting is required to approve the adjournment proposal. Any abstention by a Crestwood unitholder will have the same effect as a vote “AGAINST” the adjournment proposal. The failure of any Crestwood unitholder to submit a vote (e.g., by not submitting a proxy or not voting online) and broker non-votes will have no effect on the adoption of the adjournment proposal.

Recommendation of the Crestwood Board of Directors and Reasons for the Merger (See page 58)

The Crestwood board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Crestwood and its unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, (iv) resolved to recommend adoption of the merger agreement by the Crestwood unitholders and (v) directed that the merger agreement be submitted to the Crestwood unitholders for adoption. In addition, the Crestwood board of directors recommends that the Crestwood unitholders vote to approve, on an advisory (non-binding) basis, specified compensation that may be received by Crestwood’s named executive officers in connection with the merger and to approve any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal. In reaching its decision to approve and adopt the merger agreement and recommend to the Crestwood unitholders that they vote to approve and adopt the merger agreement and the transactions contemplated thereby, the Crestwood board of directors consulted with Crestwood management and its financial and legal advisors and considered the factors described in the section titled “Proposal 1: The Merger—Recommendation of the Crestwood Board of Directors and Reasons for the Merger” beginning on page 58.

Opinion of Crestwood’s Financial Advisor (See page 63)

In connection with the proposed merger, Evercore Group L.L.C. (“Evercore”) delivered a written opinion, dated as of August 15, 2023, to the Crestwood board of directors, as to the fairness, from a financial point of view and as of the date of the opinion, of the exchange ratio to the Crestwood common unitholders. The full text of the written opinion of Evercore, dated as of August 15, 2023, which sets forth, among other things, the

 

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procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached hereto as Annex B to this proxy statement/prospectus. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Crestwood board of directors in connection with its evaluation of the fairness of the exchange ratio, from a financial point of view, to the Crestwood common unitholders and did not address any other aspects or implications of the merger. Evercore’s opinion should not be construed as creating any fiduciary duty on Evercore’s part to any party and such opinion was not intended to be, and does not constitute, a recommendation to the Crestwood board of directors or to any other persons in respect of the merger, including as to how any Crestwood unitholder should act or vote in respect of the merger. The summary of the Evercore opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex B.

For a description of the opinion that the Crestwood board of directors received from Evercore, see “Proposal 1: The Merger—Opinion of Crestwood’s Financial Advisor” beginning on page 63.

Interests of Crestwood’s Directors and Executive Officers in the Merger (See page 78)

In considering the recommendation of the Crestwood board of directors that you vote to approve and adopt the merger agreement and the merger, you should be aware that aside from their interests as Crestwood unitholders, Crestwood’s directors and executive officers have interests in the merger that are different from, or in addition to, those of other Crestwood unitholders generally. The members of the Crestwood board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the Crestwood unitholders that the merger agreement and the merger be adopted. See “Proposal 1: The Merger—Background of the Merger” and “Proposal 1: The Merger—Recommendation of the Crestwood Board of Directors and Reasons for the Merger.” Crestwood’s unitholders should take these interests into account in deciding whether to vote “FOR” the merger proposal. These interests are described in more detail below, and certain of them are quantified in the narrative and the tables below.

Regulatory Approvals Required for the Merger (See page 86)

Governmental and regulatory approvals are required to complete the transactions contemplated by the merger agreement. These approvals include the expiration or termination of the applicable waiting period, and any extension thereof, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). Energy Transfer and Crestwood each filed the required notification and report forms under the HSR Act on August 25, 2023. At any time before or after the completion of the merger, the Antitrust Division of the Department of Justice (the “Antitrust Division”), the Federal Trade Commission (“FTC”), foreign antitrust authorities, or others could take action under the antitrust laws as deemed necessary or desirable in the public interest, including without limitation seeking to enjoin the completion of the merger or to permit completion only subject to regulatory concessions or conditions.

No Appraisal or Dissenters’ Rights (See page 95)

No appraisal or dissenters’ rights are available with respect to the merger.

NYSE Listing of ET Units (See page 89)

ET common units are currently listed on the NYSE under the ticker symbol “ET.” It is a condition to closing that the ET common units and new ET preferred units to be issued in the merger to Crestwood unitholders be approved for listing on the NYSE, subject to official notice of issuance. Although the merger agreement requires that new ET preferred units issued in connection with the merger be listed on the NYSE, there can be no assurance that such new ET preferred units will continue to be listed in the future.

 

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Delisting and Deregistration of Crestwood Common Units and Preferred Units (See page 89)

Crestwood common units are currently listed on the NYSE under the ticker symbol “CEQP,” and Crestwood preferred units are currently listed on the NYSE under the ticker symbol “CEQP-P.” If the merger is completed, Crestwood common units and Crestwood preferred units will cease to be listed on the NYSE and will be deregistered under the Exchange Act.

Conditions to Completion of the Merger (See page 93)

The obligations of Energy Transfer, on the one hand, and Crestwood, on the other hand, to complete the merger are subject to the fulfillment (or waiver) of the following conditions under the merger agreement:

 

   

Crestwood Unitholder Approval. Approval and adoption of the merger agreement by holders of a majority of the outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class.

 

   

No Injunction. No injunction or law prohibiting the merger.

 

   

Regulatory Approvals. Expiration or termination of any applicable waiting period, and any extensions thereof, under the HSR Act.

 

   

Legal Opinions. The receipt by Crestwood and Energy Transfer, respectively, of written opinions from nationally recognized law firms with respect to certain tax matters.

 

   

Registration Statement. The registration statement (of which this document forms a part) must be effective, and no proceeding for the purpose of suspending the effectiveness of the registration statement has been initiated or threatened by the SEC.

 

   

NYSE Listing. Approval for listing on the NYSE, subject to official notice of issuance, of the ET common units and new ET preferred units to be issued in the merger.

 

   

Accuracy of Representations; No Material Adverse Effect. Accuracy of the other party’s representations, except with certain exceptions, where the failure to be accurate would not have a material adverse effect on Crestwood or Energy Transfer, as applicable, and the absence of a material adverse effect, with respect to Energy Transfer’s and Crestwood’s business, financial condition or continuing results of operation, respectively, since the date of the merger agreement.

 

   

Compliance with Covenants. Material compliance with each party’s covenants.

Neither Energy Transfer nor Crestwood can give any assurance that all of the conditions to the merger will either be satisfied or waived or that the merger will occur.

Non-Solicitation by Crestwood (See page 103)

The merger agreement contains a detailed provision prohibiting Crestwood from soliciting or engaging in discussions with any person with respect to a potential alternative transaction, providing non-public information about Crestwood or recommending or agreeing to an alternative takeover proposal, unless the Crestwood board of directors determines that the alternative proposal is, or could reasonably be expected to lead to, a “superior offer” (as defined in the merger agreement) and such alternative proposal was not made or received in violation of the non-solicitation prohibitions.

If the Crestwood board of directors determines that a proposal is a superior offer and decides to change its recommendation to unitholders in favor of the merger or terminate the merger agreement in order to accept a superior offer, Crestwood must first negotiate in good faith with Energy Transfer for 72 hours to modify the current transaction such that the alternative transaction would no longer constitute a superior offer (or for 48 hours if the acquisition proposal is modified by the party making such acquisition proposal).

 

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Termination of the Merger Agreement (See page 112)

The merger agreement can be terminated in the following circumstances:

 

   

Mutual Agreement. Mutual agreement of Energy Transfer and Crestwood.

 

   

End Date. Termination by either party, if the merger has not closed by December 31, 2023 (the “End Date”); except that (a) Energy Transfer may extend the End Date by no less than 45 days and up to August 16, 2024, so long as it agrees to extend the application and effectiveness of the covenant prohibiting Energy Transfer from making acquisitions or entering into joint ventures that would reasonably be expected to prevent, materially impede or materially delay the consummation of the merger (the “M&A limitation covenant”) for an equal amount of time, (b) Crestwood may extend the End Date by no less than 45 days and up to August 16, 2024 (but no such extension by Crestwood will have any effect on the M&A limitation covenant) and (c) if the End Date has been extended pursuant to either clause (a) or clause (b) above, or a combination thereof, to August 16, 2024, and if all closing conditions (other than the conditions pertaining to the absence of court orders and regulatory injunctions and termination of regulatory waiting periods) are satisfied or are capable of being satisfied at such time, (1) Energy Transfer may extend the End Date to November 16, 2024, so long as it agrees to extend the application and effectiveness of the M&A limitation covenant to November 16, 2024, and (2) Crestwood may extend the End Date to November 16, 2024 (but no such extension by Crestwood will have any effect on the M&A limitation covenant).

 

   

Final Injunction or Other Law. Termination by either party, if a permanent injunction has been issued or other law has been enacted prohibiting the merger.

 

   

Unitholder Rejection. Termination by either party, if Crestwood unitholders fail to approve and adopt the merger agreement at the special meeting.

 

   

Superior Offer. Termination by Crestwood, prior to Crestwood unitholder approval of the merger, in order to accept a superior offer, in which case, Crestwood must contemporaneously pay Energy Transfer the $96.0 million breakup fee described below.

 

   

Change in Recommendation. Termination by Energy Transfer, if the Crestwood board of directors changes its recommendation to the Crestwood unitholders to vote for the merger.

 

   

Breach of Representations or Covenants. Termination by either party, if the other party has breached its representations or covenants in a way that causes a closing condition to fail.

 

   

Willful Breach of Non-Solicit Obligations. Termination by Energy Transfer, prior to Crestwood unitholder approval, if Crestwood has willfully and materially breached its non-solicit obligations.

Breakup Fee (See page 113)

Breakup Fee. Crestwood must pay Energy Transfer a breakup fee of $96.0 million (the “breakup fee”) in the following circumstances:

 

   

Termination to Accept Superior Offer. Crestwood terminates the merger agreement in order to accept a superior offer.

 

   

Willful Breach of Non-Solicitation Obligations. Energy Transfer terminates the merger agreement prior to the approval of the merger agreement by the Crestwood unitholders because Crestwood has willfully and materially breached its non-solicitation obligations.

 

   

Change in Recommendation Following an Alternative Proposal. Energy Transfer terminates the merger agreement because the Crestwood board of directors changes its recommendation for the merger.

 

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Failure to Call a Unitholders’ Meeting by the End Date Following an Alternative Proposal. (1) Energy Transfer terminates the merger agreement because Crestwood breaches its obligation under the merger agreement to call the special meeting, (2) prior to such termination an alternative proposal is made to Crestwood (and publicly disclosed) and not withdrawn and (3) Crestwood enters into an agreement providing for or consummates an alternative takeover transaction involving 50% of the assets or equity of Crestwood within 12 months after the termination of the merger agreement.

 

   

Unitholder Rejection Following an Alternative Proposal with Subsequent Deal. (1) Either party terminates the merger agreement because the Crestwood unitholders do not approve and adopt the merger agreement at the special meeting prior to such termination, (2) an alternative proposal is made to Crestwood (and publicly disclosed) prior to the special meeting and not withdrawn and (3) Crestwood enters into an agreement providing for or consummates an alternative takeover transaction involving 50% of the assets or equity of Crestwood within 12 months after the termination of the merger agreement.

Accounting Treatment of the Transactions (See page 86)

In accordance with accounting principles generally accepted in the United States and in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 805-Business Combinations, Energy Transfer will account for the merger as an acquisition of a business.

Material U.S. Federal Income Tax Consequences of the Merger (See page 115)

The tax consequences of the merger to each Crestwood unitholder will depend on such unitholder’s own situation. The tax discussions in this proxy statement/prospectus focus on the U.S. federal income tax consequences generally applicable to individuals who are residents or citizens of the United States that acquired their units for cash and hold their units as capital assets, and these discussions have only limited application to other unitholders. Crestwood unitholders are urged to consult their own tax advisors for a full understanding of the U.S. federal, state, local and non-U.S. tax consequences of the merger to them.

For U.S. federal income tax purposes, the merger is intended to be a partnership merger transaction under Sections 1.708-1(c)(1) and 1.708-1(c)(3)(i) of the regulations (the “Treasury Regulations”) promulgated by the U.S. Department of the Treasury under the Internal Revenue Code of 1986, as amended (the “Code”) (and, solely with respect to any Redemption Elections, Treasury Regulations Section 1.708-1(c)(4)), whereby Crestwood is treated as the terminating partnership and Energy Transfer is treated as the continuing partnership.

Accordingly, for U.S. federal income tax purposes: (i) any Crestwood preferred unitholder who receives cash pursuant to a Redemption Election should be treated as selling a portion of its Crestwood preferred units to Energy Transfer for cash prior to the merger, (ii) Crestwood should be deemed to contribute all of its assets to Energy Transfer in exchange for the common unit merger consideration and preferred consideration (other than cash paid pursuant to any Redemption Elections) and the assumption of Crestwood’s liabilities and (iii) Crestwood should then be deemed to make a liquidating distribution of such common unit merger consideration and the preferred consideration to the Crestwood unitholders in respect of their Crestwood common units and remaining Crestwood preferred units.

Generally, (i) Crestwood common unitholders should not recognize gain or loss solely as a result of the receipt of ET common units and (ii) Crestwood preferred unitholders should not recognize gain or loss solely as a result of the receipt of new ET preferred units or ET common units. However, Crestwood unitholders may recognize gain or loss in certain specific situations, including (i) with respect to any deemed distributions made to a Crestwood unitholder as a result of a net decrease in such unitholder’s share of nonrecourse liabilities as a

 

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result of the merger, (ii) the receipt of cash in lieu of fractional ET common units or (iii) to the extent contributions of cash or other property to Crestwood on or after the date of the merger agreement and prior to the effective time of the merger are treated as part of a “disguised sale” of property.

 

Crestwood preferred unitholders who properly make a Redemption Election with respect to part or all of their Crestwood preferred units will receive as consideration for such Crestwood preferred units, at the sole discretion of Crestwood GP, Crestwood common units or cash at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $                 per preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption. Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have elected to have such Crestwood preferred units redeemed pursuant to a Redemption Election. Crestwood preferred unitholders that receive cash pursuant to a Redemption Election should be treated as selling the applicable Crestwood preferred units immediately prior to the merger and, as a result, should recognize gain or loss equal to the difference between the amount realized and such Crestwood preferred unitholder’s tax basis in the Crestwood preferred units sold. A Crestwood preferred unitholder’s amount realized is equal to the amount of cash received by such Crestwood unitholder (plus the applicable portion of such Crestwood preferred unitholder’s share of Crestwood’s nonrecourse liabilities immediately prior to the merger, which is expected to be zero).

The amount and effect of any gain or loss that may be recognized by a Crestwood unitholders will depend on such unitholder’s particular situation, including the ability of such Crestwood unitholder to utilize any suspended passive losses.

For a more detailed discussion of the material U.S. federal income tax consequences to Crestwood unitholders of the merger, please see the section titled “Material U.S. Federal Income Tax Consequences of the Merger.”

Comparison of Rights of Energy Transfer Common Unitholders, New ET Preferred Unitholders, Crestwood Common Unitholders and Crestwood Preferred Unitholders (See page 152)

The rights of Crestwood unitholders are currently governed by the Crestwood Partnership Agreement and certificate of limited partnership, as amended, as well as the Delaware Act. Crestwood unitholders who receive ET common units or new ET preferred units in the merger will become Energy Transfer common unitholders or new ET preferred unitholders upon completion of the merger, and their rights as such will be governed by Energy Transfer’s certificate of limited partnership, as amended, the Energy Transfer Partnership Agreement and the Delaware Act. As a result, these Crestwood unitholders will have different rights once they become ET common unitholders or new ET preferred unitholders due to the differences in the governing documents of Crestwood and Energy Transfer. Further, the Crestwood preferred unitholders may elect to receive the new ET preferred units, which will have substantially similar terms, including with respect to economics and structural protections, as the Crestwood preferred units. The differences between the ET common units and Crestwood common units and a comparison of the differences between the new ET preferred units and the Crestwood preferred units are described in detail in the section titled “Comparison of Rights of Energy Transfer Common Unitholders, New ET Preferred Unitholders, Crestwood Common Unitholders and Crestwood Preferred Unitholders.”

Expected Timing of the Merger (See page 85)

Energy Transfer and Crestwood currently expect to complete the merger in the fourth quarter of 2023, subject to the receipt of required Crestwood unitholder and regulatory approvals and the satisfaction or waiver of the other conditions to completion of the merger. Because many of the conditions to completion of the merger are beyond the control of Energy Transfer and Crestwood, the exact timing for completion of the merger cannot be predicted with any degree of certainty.

 

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Litigation Related to the Merger (See page 89)

Energy Transfer and Crestwood may be subject to class action lawsuits relating to the merger, which could result in an injunction preventing the completion of the merger, substantial costs to Energy Transfer and Crestwood and/or materially adversely affect their business, financial condition and operating results. As of September 8, 2023, Crestwood and Energy Transfer are unaware of any securities class action lawsuits or derivative lawsuits having been filed in connection with the merger. See “Risk Factors” for additional information regarding any such potential litigation.

Advisory Vote on Specified Compensation (See page 183)

Crestwood is requesting the Crestwood unitholders’ approval, on an advisory (non-binding) basis, of specified compensation that may be payable to Crestwood’s named executive officers in connection with the merger.

Unaudited Comparative Per Unit Information of Energy Transfer and Per Unit Information of Crestwood

ET common units are currently listed on the NYSE under the ticker symbol “ET.” Crestwood common units and preferred units are currently listed on the NYSE under the ticker symbol “CEQP” and “CEQP-P,” respectively.

The table below presents closing prices for ET common units, the Crestwood common units and the Crestwood preferred units on (i) August 15, 2023, the last trading day before the public announcement of the execution of the merger agreement and (ii)                 , 2023, a recent trading day before the date of this document. This table also presents the equivalent market value per Crestwood common unit on August 15, 2023 and                 , 2023. The equivalent market value per Crestwood common unit has been determined by multiplying the closing prices of ET common units on those dates by the exchange ratio of 2.07 ET common units to be received by the Crestwood common unitholders.

Although the exchange ratio is fixed, the market prices of ET common units and Crestwood common units will fluctuate before the merger is completed and the market value of the common unit merger consideration and preferred consideration ultimately received by Crestwood unitholders will depend on the closing price of ET common units on the day the merger is consummated. Thus, Crestwood unitholders will not know the exact value of the common unit merger consideration and preferred consideration they will receive until the closing of the merger.

 

     ET
Common
Units
     Crestwood
Common
Units
     Equivalent
Market
Value per ET
Common
Unit
     Crestwood
Preferred
Units
 

August 15, 2023

   $ 12.56      $ 26.19      $ 25.9992      $ 9.09  

                , 2023

   $        $        $        $    

 

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The table below sets forth, for the calendar quarters indicated, the high and low sale prices per ET common unit, per Crestwood common unit and per Crestwood preferred unit on the NYSE. The table also shows the amount of cash distributions and cash distributions declared per ET common unit, per Crestwood common unit and per Crestwood preferred unit for the calendar quarters indicated. The information in the table below is historical only. Energy Transfer and Crestwood urge Crestwood unitholders to obtain current market quotations for ET common units, Crestwood common units and Crestwood preferred units.

 

    ET Common Units     Crestwood Common Units     Crestwood Preferred Units  
    High     Low     Cash
Distributions
    High     Low     Cash
Distributions
    High     Low     Cash
Distributions
 

2023

                 

Third quarter (through September 8, 2023)(1)

  $ 13.85     $ 12.46     $     $ 29.48     $ 25.29     $     $ 9.75     $ 9.02     $  

Second quarter

    13.09       12.175       0.31       28.12       22.57       0.655       9.29       8.84       0.2111  

First quarter

    13.67       11.45       0.3075       28.65       22.11       0.655       9.46       8.60       0.2111  

2022

                 

Fourth quarter

  $ 12.95     $ 11.08     $ 0.305     $ 31.46     $ 25.90     $ 0.655     $ 9.35     $ 8.57     $ 0.2111  

Third quarter

    12.49       9.15       0.265       30.85       22.88       0.655       9.59       8.30       0.2111  

Second quarter

    12.48       9.565       0.23       32.96       23.39       0.655       10.00       8.89       0.2111  

First quarter

    11.575       8.26       0.20       32.50       25.86       0.625       10.07       9.49       0.2111  

2021

                 

Fourth quarter

  $ 10.22     $ 7.96     $ 0.175     $ 30.69     $ 23.57     $ 0.625     $ 10.26     $ 9.18     $ 0.2111  

Third quarter

    10.77       8.60       0.1525       30.66       25.39       0.625       10.00       9.16       0.2111  

Second quarter

    11.55       7.62       0.1525       33.94       26.84       0.625       9.64       8.65       0.2111  

First quarter

    8.70       6.03       0.1525       27.43       18.05       0.625       8.95       7.35       0.2111  

 

(1)

Cash distributions in respect of the third quarter of 2023 have not been declared or paid.

 

 

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RISK FACTORS

In addition to the other information included and incorporated by reference into this document, including the matters addressed in the section titled “Cautionary Statement Regarding Forward-Looking Statements,” you should carefully consider the following risks before deciding whether to vote for the approval and adoption of the merger agreement and the transactions contemplated thereby. In addition, you should read and consider the risks associated with each of the businesses of Energy Transfer and Crestwood. These risks can be found in Energy Transfer’s and Crestwood’s respective Annual Reports on Form 10-K for the year ended December 31, 2022, as updated by subsequent Quarterly Reports on Form 10-Q, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. For further information regarding the documents incorporated into this document by reference, please see the section titled “Where You Can Find More Information.” Realization of any of the risks described below, any of the events described under “Cautionary Statement Regarding Forward-Looking Statements” or any of the risks or events described in the documents incorporated by reference could have a material adverse effect on Energy Transfer’s, Crestwood’s or the combined company’s business, financial condition, cash flows and results of operations and could result in a decline in the trading prices of their respective common units. Crestwood preferred unitholders should also read the Crestwood Consent Solicitation Statement for risks relating to the Preferred Consent Solicitation.

Risk Factors Related to the Merger

Because the exchange ratio is fixed, the number of ET common units to be received by Crestwood unitholders in connection with the merger will not change between now and the time the merger is completed to reflect changes in the trading prices of Crestwood common units or ET common units. Because the market price of ET common units will fluctuate prior to the consummation of the merger, Crestwood unitholders cannot be sure of the market value of ET common units that they will receive.

At the time the merger is completed, Crestwood unitholders will receive, (i) for each Crestwood common unit they own as of immediately prior to the merger (including Crestwood common units received upon the conversion of Crestwood preferred units), 2.07 ET common units and (ii) for each Crestwood preferred unit they own as of immediately prior to the effective time, the preferred consideration. The exchange ratio is fixed (subject to adjustments in accordance with the terms of the merger agreement), which means that it will not change between now and the closing date, regardless of whether the market price of either Crestwood common units or ET common units changes. At the time that Crestwood unitholders cast their votes regarding approval of the merger agreement and the merger, Crestwood unitholders will not know the actual market value of the ET common units that they will receive when the merger is finally completed. Therefore, the actual market value of the ET common units, when received by Crestwood common unitholders or Crestwood preferred unitholders, as applicable, will depend on the market value of those units on that date. This market value may be less than the value of the ET common units on the date of the merger agreement and on the date that Crestwood unitholders vote on the merger agreement. These fluctuations in the market value of ET common units may be caused by changes in the businesses, operations, results and prospects of both Energy Transfer and Crestwood, market expectations of the likelihood that the merger will be completed and the timing of the completion, general market and economic conditions or other factors.

The merger is subject to various closing conditions, and any delay in completing the merger may reduce or eliminate the benefits expected and delay the payment of the common unit merger consideration and preferred consideration to Crestwood’s unitholders.

The merger is subject to the satisfaction of a number of other conditions beyond the parties’ control that may prevent, delay or otherwise materially adversely affect the completion of the merger. These conditions include, among other things, Crestwood unitholder approval and the expiration or termination of any applicable waiting period under the HSR Act. Energy Transfer and Crestwood cannot predict with certainty whether and when any of these conditions will be satisfied. Any delay in completing the merger could cause the combined

 

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company not to realize, or delay the realization of, some or all of the benefits that the companies expect to achieve from the merger. In such context, the date on which Crestwood’s unitholders will receive the common unit merger consideration and preferred consideration is also uncertain.

Under the terms of the merger agreement, if the transaction will not close by December 31, 2023 (or the then-designated End Date), Energy Transfer is obligated to notify Crestwood as to as to whether or not Energy Transfer will agree to extend the M&A limitation covenant. If Energy Transfer declines to do so, Crestwood may extend the End Date for a period of at least 45 days and up to August 16, 2024, but will no longer enjoy the protection of the M&A limitation covenant. Without the protection of the M&A limitation covenant, Energy Transfer would be able to make acquisitions or create joint ventures that could jeopardize the ability of the parties to satisfy the closing conditions. Any such acquisitions or joint ventures could have a material adverse effect on the ability of the parties to consummate the merger.

Certain executive officers and directors of Crestwood have interests in the merger that are different from, or in addition to, the interests of Crestwood unitholders generally, which could have influenced their decision to support or approve the merger.

Certain executive officers and directors of Crestwood are parties to agreements or participants in other arrangements that give them interests in the merger that may be different from, or be in addition to, your interests as a Crestwood unitholder. The Crestwood board of directors was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the merger, in approving the merger agreement and the transactions contemplated thereby, and in recommending that the Crestwood unitholders vote in favor of the merger proposal, the advisory compensation proposal and the adjournment proposal. You should consider these interests in voting on the merger. We have described these different interests under “Proposal 1: The Merger—Interests of Crestwood’s Directors and Executive Officers in the Merger.”

Crestwood or Energy Transfer may waive one or more of the closing conditions without re-soliciting unitholder approval.

Crestwood or Energy Transfer may determine to waive, in whole or part, one or more of the conditions to closing the merger prior to Crestwood or Energy Transfer, as the case may be, being obligated to consummate the merger. Each of Crestwood and Energy Transfer expects to evaluate the materiality of any proposed waiver and its effect on its respective unitholders in light of the facts and circumstances at the time, to determine whether any amendment of this proxy statement/prospectus or any re-solicitation of proxies is required in light of such waiver. Any determination whether to waive any condition to the merger or to re-solicit unitholder approval or amending or supplementing this proxy statement/prospectus as a result of a waiver will be made by Crestwood or Energy Transfer at the time of such waiver based on the facts and circumstances as they exist at that time.

The merger agreement limits Crestwood’s ability to pursue alternatives to the merger.

The merger agreement contains provisions that make it more difficult for Crestwood to sell its business to a party other than Energy Transfer. These provisions include the general prohibition on Crestwood soliciting any acquisition proposal (as defined in the section titled “The Merger Agreement—Non-Solicitation by Crestwood”) or offer for a competing transaction from a third party, and the requirement that Crestwood pay Energy Transfer a breakup fee of $96.0 million. In addition, even if the Crestwood board of directors receives a superior offer, it must, prior to accepting any offer from a competing bidder, provide Energy Transfer with the opportunity to amend the merger agreement such that the third-party offer no longer constitutes a superior offer. See “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Breakup Fee.” The foregoing may discourage a third party that might have an interest in acquiring all or a significant part of Crestwood from considering or proposing an acquisition, even if that party were prepared to pay consideration with a higher per unit value than the current proposed common unit merger consideration and preferred consideration.

 

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Furthermore, the breakup fee provisions may result in a potential competing acquiror proposing to pay a lower per unit price to acquire Crestwood than it might otherwise have proposed to pay.

Crestwood’s and Energy Transfer’s financial estimates are based on various assumptions that may not prove to be correct.

The financial estimates set forth in the forecast included under “Proposal 1: The Merger—Crestwood and Energy Transfer Unaudited Prospective Financial Information” are based on assumptions of, and information available to, Crestwood and Energy Transfer at the time they were prepared and provided to the Crestwood board of directors and its financial advisors. Crestwood and Energy Transfer cannot know whether such assumptions will prove correct. Any or all of such estimates may turn out to be wrong. Such estimates can be adversely affected by inaccurate assumptions or by known or unknown risks and uncertainties, many of which are beyond Crestwood’s and Energy Transfer’s control. Many factors discussed in, or in documents incorporated by reference into, this proxy statement/prospectus, including the risks outlined in this “Risk Factors” section and the events or circumstances described under “Cautionary Statement Regarding Forward-Looking Statements,” will be important in determining Crestwood’s and Energy Transfer’s future results. As a result of these contingencies, actual future results may vary materially from Crestwood’s and Energy Transfer’s estimates. In view of these uncertainties, the inclusion of Crestwood’s financial estimates in this proxy statement/prospectus is not and should not be viewed as a representation that the forecast results will be achieved.

Crestwood’s and Energy Transfer’s financial estimates were not prepared with a view toward public disclosure, and such financial estimates were not prepared with a view toward compliance with published guidelines of any regulatory or professional body. Further, any forward-looking statement speaks only as of the date on which it is made, and Energy Transfer and Crestwood undertake no obligation, other than as required by applicable law, to update the financial estimates herein to reflect events or circumstances after the date those financial estimates were prepared or to reflect the occurrence of anticipated or unanticipated events or circumstances.

The financial estimates included in this proxy statement/prospectus have been prepared by, and are the responsibility of, Crestwood alone. Moreover, neither Energy Transfer’s nor Crestwood’s independent accountants, nor any other independent accountants, have compiled, examined or performed any procedures with respect to Energy Transfer’s or Crestwood’s unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or achievability thereof, and, accordingly, such independent accountants assume no responsibility for, and disclaim any association with, Crestwood’s and Energy Transfer’s unaudited prospective financial information. The reports of such independent accountants included or incorporated by reference herein, as applicable, relate exclusively to the historical financial information of the entities named in those reports and do not cover any other information in this proxy statement/prospectus and should not be read to do so.

The opinion of Crestwood’s financial advisor will not reflect changes in circumstances between the signing of the merger agreement and the completion of the merger.

The Crestwood board of directors received an opinion from its financial advisor, Evercore, in connection with the signing of the merger agreement but has not obtained any updated opinion from Evercore as of the date of this proxy statement/prospectus. Changes in the operations and prospects of Energy Transfer or Crestwood, general market and economic conditions and other factors that may be beyond the control of Energy Transfer or Crestwood, and on which the Evercore’s opinion was based, may significantly alter the value of Energy Transfer or Crestwood or the prices of ET common units or Crestwood common units by the time the merger is completed. The opinion does not speak as of the time the merger will be completed or as of any date other than the date of such opinion. Because Crestwood does not currently anticipate asking Evercore to update its opinion, such opinion will not address the fairness of the exchange ratio from a financial point of view at the time the merger is completed or as of the date of this proxy statement/prospectus. The Crestwood board of directors’ recommendation that Crestwood unitholders vote in favor of the merger proposal, the advisory compensation proposal and the adjournment proposal, however, are made as of the date of this proxy statement/prospectus.

 

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A different set of factors and conditions than those that affect Crestwood unitholders affect ET unitholders and could have a negative impact on the ET common unit price following the closing of the merger.

Upon completion of the merger, Crestwood unitholders who receive ET common units or the new ET preferred units will become equityholders in Energy Transfer. The businesses of Energy Transfer and the other companies it has acquired and may acquire in the future are different in many respects from those of Crestwood. There is a risk that various factors, conditions and developments that would not affect the price of Crestwood common units or Crestwood preferred units could negatively affect the price of ET common units or the new ET preferred units. Accordingly, following the closing of the merger, the market price and performance of ET common units is likely to be different from that of the historical market price and performance of Crestwood common units. Please see the section titled “Cautionary Statement Regarding Forward-Looking Statements” for a summary of some of the key factors that might affect Energy Transfer and the prices at which ET common units may trade from time to time. Crestwood unitholders are also urged to read carefully the risk factors included in Energy Transfer’s Annual Report on Form 10-K for the year ended December 31, 2022 and any subsequent Quarterly Reports on Form 10-Q, which are incorporated by reference into this document.

Crestwood unitholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Crestwood unitholders currently have the right to vote in the election of the Crestwood board of directors and other matters affecting Crestwood. When the merger occurs, each Crestwood unitholder will become a unitholder of Energy Transfer with a percentage ownership of the combined company that is much smaller than such unitholder’s percentage ownership of Crestwood. For example, based on the number of ET common units and Crestwood common units and Crestwood preferred units outstanding as of September 8, 2023, Crestwood unitholders will own approximately 6.5% of the outstanding ET common units after the merger (which number would be 6.9% assuming all Crestwood preferred unitholders elect to convert their Crestwood preferred units into Crestwood common units). Energy Transfer unitholders are not entitled to elect the directors of Energy Transfer’s general partner. In addition, Energy Transfer unitholders have only limited voting rights on matters affecting Energy Transfer’s business and, therefore, limited ability to influence management’s decisions regarding its business. Because of this, Crestwood unitholders will have less influence on the management and policies of Energy Transfer than they have now on the management and policies of Crestwood.

ET common units to be received by Crestwood unitholders as a result of the merger will have different rights from Crestwood common units and, if applicable, Crestwood preferred units.

Following completion of the merger, Crestwood unitholders will no longer hold Crestwood units but will instead be unitholders of Energy Transfer. There are important differences between the rights of Crestwood unitholders and the rights of Energy Transfer unitholders. See “Comparison of Rights of Energy Transfer Common Unitholders, New ET Preferred Unitholders, Crestwood Common Unitholders and Crestwood Preferred Unitholders” for a discussion of the different rights associated with Crestwood common units and ET common units.

The trading price and volume of ET common units, which Crestwood common unitholders will receive in connection with the merger, may be volatile following the merger.

The trading price and volume of ET common units, which Crestwood common unitholders will receive in connection with the merger, may be volatile following completion of the merger. The equity markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of ET common units. As a result, Crestwood unitholders who receive ET common units may suffer a loss on their investment. Many factors may impair the market for ET common units following the merger and the ability of investors to sell units at an attractive price and could also cause the market price and demand for ET common units to fluctuate substantially

 

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following the merger, which may negatively affect the price and liquidity of ET common units following the merger. Many of these factors and conditions are beyond the control of Energy Transfer or Crestwood or their respective unitholders.

If the merger agreement is terminated, under certain circumstances, Crestwood may be obligated to pay a breakup fee to Energy Transfer. This cost could require Crestwood to seek loans or use Crestwood’s available cash that would have otherwise been available for operations, distributions or other general partnership purposes.

In certain circumstances, Crestwood may be obligated to pay a breakup fee to Energy Transfer of $96.0 million. If the merger agreement is terminated, the breakup fee required to be paid, if any, by Crestwood under the merger agreement may require Crestwood to seek loans or borrow amounts to enable it to pay these amounts to Energy Transfer. In either case, payment of these amounts would reduce the cash Crestwood has available for operations, distributions or other general partnership purposes. See “The Merger Agreement—Breakup Fee.”

The failure to successfully combine the businesses of Energy Transfer and Crestwood in the expected time frame may adversely affect Energy Transfer’s future results, which may adversely affect the value of the ET common units and new ET preferred units, as applicable, that Crestwood unitholders would receive in the merger.

The success of the merger will depend, in part, on the ability of Energy Transfer to realize the anticipated benefits from combining the businesses of Energy Transfer and Crestwood. To realize these anticipated benefits, Energy Transfer’s and Crestwood’s businesses must be successfully combined. If the combined company is not able to achieve these objectives, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual integration may result in additional and unforeseen expenses, which could reduce the anticipated benefits of the merger.

Energy Transfer and Crestwood, including their respective subsidiaries, have operated and, until the completion of the merger, will continue to operate independently. It is possible that the integration process could result in the loss of key employees, as well as the disruption of each company’s ongoing businesses or inconsistencies in their standards, controls, procedures and policies. Any or all of those occurrences could adversely affect the combined company’s ability to maintain relationships with customers and employees after the merger or to achieve the anticipated benefits of the merger. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on each of Energy Transfer and Crestwood.

If a governmental authority asserts objections to the merger, Energy Transfer and Crestwood may be unable to complete the merger or, in order to do so, Energy Transfer and Crestwood may be required to comply with material restrictions or satisfy material conditions.

The closing of the merger is subject to the condition that there is no law, injunction, judgment or ruling by a governmental authority in effect enjoining, restraining, preventing or prohibiting the merger. Pursuant to the merger agreement, Energy Transfer and Crestwood each agreed to take any and all steps necessary to eliminate each and every impediment under any antitrust law, such as the HSR Act, that is asserted by any U.S. governmental authority, such as the Antitrust Division or the FTC, in order to facilitate the closing of the merger by the End Date, including, but not limited to, defending through litigation on the merits any claim asserted in court by any party in order to avoid entry of, or to have vacated or terminated, any decree, order or judgment that would prevent the closing of the merger from occurring on or prior to the End Date. However, Energy Transfer is not required to, nor is it obligated to agree to allow Crestwood to, nor is Crestwood, without Energy Transfer’s written consent, permitted to, (i) sell, divest, license, transfer or otherwise dispose of any businesses, assets, equity interest, product lines, or properties of any person, (ii) create, terminate, modify or amend any agreements,

 

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relationships, rights or obligations of any person, or (iii) accept any restriction on its freedom of action after the closing of the merger.

There can be no assurance as to the cost, scope or impact of the actions that may be required to address any governmental authority objections to the merger. If Energy Transfer or Crestwood takes such actions, it could be detrimental to it or to the combined company following the consummation of the merger. Furthermore, these actions could have the effect of delaying or preventing completion of the proposed merger or imposing additional costs on or limiting the revenue or cash available for distribution of the combined company following the consummation of the merger. See “The Merger—Regulatory Approvals.”

Additionally, state attorneys general or other state or local regulators could seek to block, rescind or challenge the merger as they deem necessary or desirable in the public interest at any time, including after completion of the merger. In addition, in some circumstances, a third party could initiate a private action under antitrust laws challenging or seeking to enjoin or rescind the merger, before or after it is completed. Energy Transfer and Crestwood may not prevail and may incur significant costs in defending or settling any action under the antitrust laws, including being required to divest assets or accept behavioral or other remedies in order to complete the merger.

The pendency of the merger could materially adversely affect the future business and operations of Crestwood or result in a loss of Crestwood employees.

In connection with the pending merger, it is possible that some customers, suppliers and other persons with whom Crestwood has a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationship with Crestwood as a result of the merger, which could negatively impact revenues, earnings and cash flows of Crestwood, as well as the market price of Crestwood common units and Crestwood preferred units, regardless of whether the merger is completed. Similarly, current and prospective employees of Crestwood may experience uncertainty about their future roles with Energy Transfer and Crestwood following completion of the merger, which may materially adversely affect the ability of Crestwood to attract and retain key employees.

Energy Transfer and Crestwood will incur substantial transaction-related costs in connection with the merger, including fees paid to legal, financial and accounting advisors, filing fees and printing costs.

Energy Transfer and Crestwood expect to incur a number of non-recurring costs associated with negotiating and completing the merger, combining the operations of the two partnerships and achieving the desired synergies. These fees and costs have been, and will continue to be substantial. Non-recurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees and printing costs. Additionally, while Energy Transfer and Crestwood have assumed that a certain level of expenses would be incurred, there are many factors beyond their control that could affect the total amount or the timing of the expenses. The elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may not offset integration-related costs. Thus, any net benefit of the merger may not be achieved in the near term, the long term or at all.

Failure to complete the merger could negatively affect the price of Crestwood units and Crestwood’s future businesses and financial results.

If the merger is not completed, the ongoing business of Crestwood may be adversely affected and Crestwood will be subject to several risks and consequences, including the following:

 

   

under the merger agreement, Crestwood may be required, under certain circumstances, to pay Energy Transfer a breakup fee of $96.0 million;

 

   

Crestwood will be required to pay certain costs relating to the merger, whether or not the merger is completed, such as legal, accounting and financial advisor fees;

 

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under the merger agreement, Crestwood is subject to certain restrictions on the conduct of its business prior to completing the merger without Energy Transfer’s consent, which may adversely affect its ability to execute certain of its business strategies; and

 

   

matters relating to the merger may require substantial commitments of time and resources by Crestwood management, which could otherwise have been devoted to other opportunities that may have been beneficial to Crestwood as an independent company.

In addition, if the merger is not completed, Crestwood may experience negative reactions from the financial markets and from its customers and employees. Crestwood also could be subject to litigation related to any failure to complete the merger or to enforcement proceedings commenced against Crestwood to attempt to force it to perform its obligations under the merger agreement.

Energy Transfer and Crestwood may be subject to class action lawsuits relating to the merger, which could result in an injunction preventing the completion of the merger, substantial costs to Energy Transfer and Crestwood and/or materially adversely affect their business, financial condition and operating results.

Energy Transfer, Crestwood and their directors and officers may be subject to class action lawsuits relating to the merger and other additional lawsuits that may be filed. Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Crestwood’s and Energy Transfer’s liquidity and financial condition.

Lawsuits that may be brought against Energy Transfer, Crestwood or their respective directors and officers could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the merger agreement already implemented and to otherwise enjoin the parties from consummating the merger. One of the conditions to the closing of the merger is that no injunction by any court or other tribunal of competent jurisdiction has been entered and continues to be in effect and no law has been adopted or is effective, in either case that prohibits or makes illegal the closing of the merger. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the merger, then that injunction may delay or prevent the merger from being completed, which may adversely affect Crestwood’s and Energy Transfer’s business, financial position and results of operation.

There can be no assurance that any of the defendants will be successful in the outcome of any pending or any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect Energy Transfer’s and Crestwood’s respective businesses, financial condition, results of operations and cash flows. As of September 8, 2023, Crestwood and Energy Transfer are unaware of any securities class action lawsuits or derivative lawsuits having been filed in connection with the merger.

Crestwood unitholders are not entitled to appraisal or dissenters’ rights in connection with the merger.

Appraisal rights are statutory rights that enable unitholders to dissent from certain extraordinary transactions, such as certain mergers, and to demand that the partnership pay the fair value for their units as determined by a court in a judicial proceeding instead of receiving the consideration offered to unitholders in connection with the applicable transaction. Under the Delaware Act and Crestwood Partnership Agreement, Crestwood unitholders will not have rights to an appraisal of the fair value of their Crestwood common units or Crestwood preferred units in connection with the merger. See “Summary—No Appraisal or Dissenters’ Rights.”

 

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If the merger, as well as the proposed amendments to the Crestwood Partnership Agreement resulting from the Preferred Consent Solicitation and become effective, such amendments may result in reduced liquidity for Crestwood preferred unitholders electing to receive new ET preferred units in the merger.

Although the merger agreement requires that new ET preferred units issued in connection with the merger be listed on the NYSE, there can be no assurance that such new ET preferred units will continue to be listed in the future. Also, if the proposed amendments to the Crestwood Partnership Agreement are approved in the Preferred Consent Solicitation and become effective, more Crestwood preferred unitholders may (i) convert their Crestwood preferred units into Crestwood common units prior to the completion of the merger or (ii) make a Redemption Election in connection with the consideration they elect to receive in the merger, which collectively would reduce the aggregate number of new ET preferred units that may be outstanding after the completion of the merger. As a result of any of the foregoing factors, the trading market for such new ET preferred units would become more limited than the existing trading market for Crestwood preferred units or the trading market for such units if the proposed amendments do not become effective. In addition, after the completion of the merger, Energy Transfer could elect to conduct one or more tender offers for the new ET preferred units, which would have the effect of further limiting the trading market for the new ET preferred units. A more limited trading market might adversely affect the liquidity and market price of such securities.

Tax Risks Related to the Merger

No ruling has been obtained with respect to the U.S. federal income tax consequences of the merger.

No ruling has been or will be requested from the Internal Revenue Service (the “IRS”) with respect to the U.S. federal income tax consequences of the merger. Each of Energy Transfer and Crestwood are relying on the opinions of their respective counsel as to the U.S. federal income tax consequences of the merger, and such opinions may not be sustained if challenged by the IRS. Please read the section titled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 115.

The expected U.S. federal income tax consequences of the merger are dependent upon Energy Transfer and Crestwood being treated as partnerships for U.S. federal income tax purposes.

The expected U.S. federal income tax consequences of the merger are dependent upon Energy Transfer and Crestwood being treated as partnerships for U.S. federal income tax purposes at the time of the merger. If either Energy Transfer or Crestwood were treated as a corporation for U.S. federal income tax purposes at the time of the merger, the consequences of the merger would be materially different. If Energy Transfer were to be treated as a corporation for U.S. federal income tax purposes, the merger would likely be a fully taxable transaction to Crestwood unitholders. For additional information, please read the section titled “Material U.S. Federal Income Tax Consequences of the Merger—Assumptions Related to the U.S. Federal Income Tax Treatment of the Merger” beginning on page 117.

Crestwood unitholders could recognize taxable income, gain or loss for U.S. federal income tax purposes, in certain circumstances, as a result of the merger.

For U.S. federal income tax purposes, (i) any Crestwood preferred unitholder who receives cash pursuant to a Redemption Election should be treated as selling a portion of its Crestwood preferred units to Energy Transfer for cash prior to the merger, and (ii) Crestwood should be deemed to contribute all of its assets to Energy Transfer in exchange for the merger consideration (other than cash paid pursuant to any Redemption Elections) and the assumption of Crestwood’s liabilities and (iii) Crestwood should then be deemed to make a liquidating distribution of such merger consideration to the Crestwood unitholders in respect of their Crestwood common units and remaining Crestwood preferred units.

A deemed receipt of cash by Crestwood as a result of Energy Transfer’s deemed assumption of Crestwood’s liabilities could give rise to the recognition of taxable gain by Crestwood, and any such taxable gain would be

 

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allocated to the Crestwood unitholders pursuant to the Crestwood Partnership Agreement. Crestwood expects that the deemed receipt of cash by Crestwood will qualify for one or more exceptions to sale treatment. Please read the section titled “Material U.S. Federal Income Tax Consequences of the Merger—Tax Consequences of the Merger to Crestwood.”

In addition, as a result of the merger, Crestwood unitholders who receive ET common units or new ET preferred units, as applicable, will become partners of Energy Transfer for U.S. federal income tax purposes and Crestwood unitholders who receive ET common units may be allocated a share of Energy Transfer’s nonrecourse liabilities. Each Crestwood unitholder will be treated as receiving a deemed cash distribution equal to the excess, if any, of such Crestwood unitholder’s share of nonrecourse liabilities of Crestwood immediately before the merger over such Crestwood unitholder’s share of nonrecourse liabilities of Energy Transfer immediately following the merger. If the amount of any deemed cash distribution received by such Crestwood unitholder exceeds such Crestwood unitholder’s basis in its Crestwood units, such Crestwood common unitholder will recognize gain in an amount equal to such excess. While there can be no assurance, Crestwood and Energy Transfer expect that most Crestwood unitholders will not recognize gain in this manner.

Further, the contribution of property or cash by a partner to a partnership in exchange for a new or additional interest in such partnership generally will not result in the recognition of gain or loss by such partner. However, under Section 707 of the Code and the Treasury Regulations promulgated thereunder, a contribution of cash or other property by a partner to a partnership and a transfer of property (other than an interest in such partnership) by the partnership to such partner, may, in certain circumstances, be characterized, in whole or in part, as a “disguised sale” of property by the partnership to the partner, rather than as a non-taxable distribution of such property by the partnership. For example, if a partner contributes cash to a partnership, and within a reasonable period of time before or after the contribution receives a distribution of property (other than an interest in such partnership) with a value approximately equal to the cash contributed, the transfers may be treated as part of a “disguised sale” of the distributed property. As a result, contributions of cash or other property to Crestwood on or after the date of the merger agreement and prior to the effective time of the merger may be treated as part of a “disguised sale” of a portion of the ET units received in the merger and may result in taxable gain to Crestwood. Any such taxable gain would be allocated to the Crestwood unitholders pursuant to the Crestwood Partnership Agreement.

The amount and effect of any gain that may be recognized by a Crestwood unitholder will depend on such Crestwood unitholder’s particular situation, including the ability of such Crestwood unitholder to utilize any suspended passive losses. Although likely not intended, due to uncertainty in applying new withholding rules, it is possible that non-U.S. persons may be subject to withholding with respect to the receipt of ET common units or new ET preferred units in the merger. Crestwood unitholders are urged to consult their tax advisor for a full understanding of the U.S. federal, state, local and non-U.S. tax consequences of the merger to them.

For a more detailed discussion, please see “Material U.S. Federal Income Tax Consequences of the Merger—Tax Consequences of the Merger to Crestwood Unitholders.”

Tax Risks Related to Owning ET Common Units and New ET Preferred Units Following the Merger

Certain tax consequences of the ownership of new ET preferred units are uncertain.

The tax treatment of distributions on new ET preferred units is uncertain. Energy Transfer will treat distributions on the new ET preferred units as distributions to a partner. Energy Transfer intends to treat new ET preferred unitholders as receiving an allocable share of gross income from Energy Transfer equal to their cash distributions, to the extent Energy Transfer has sufficient gross income to make such allocations of gross income. In the event there is not sufficient gross income to match such distributions, the distributions on the new ET preferred units would reduce the capital accounts of the new ET preferred units, requiring a subsequent allocation of income or gain to provide the new ET preferred units with their liquidation preference, if possible. However, if the IRS were to determine that such distributions were guaranteed payments for the use of capital, the distributions would generally be taxable to each of the new ET preferred unitholders as ordinary income and the new ET preferred

 

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unitholders would recognize taxable income from the accrual of such a guaranteed payment (even in the absence of a contemporaneous cash distribution). If the new ET preferred units are not treated as partnership interests, they would likely constitute indebtedness for U.S. federal income tax purposes, and distributions on the new ET preferred units would likely be treated as payments of interest by Energy Transfer to new ET preferred unitholders.

A new ET preferred unitholder will be required to recognize gain or loss on a sale of new ET preferred units equal to the difference between the amount realized by such holder and such holder’s tax basis in the new ET preferred units sold. The amount realized will generally equal the sum of the cash and the fair market value of other property such holder receives in exchange for such new ET preferred units. Gain or loss recognized by a holder of new ET preferred units on the sale or exchange of new ET preferred units held for more than one year will generally be taxable as long-term capital gain or loss. Because new ET preferred unitholders will generally not be allocated a share of Energy Transfer’s items of depreciation, depletion or amortization, it is not anticipated that such holders would be required to recharacterize any portion of their gain as ordinary income as a result of the recapture rules.

Please see “Material U.S. Income Tax Consequences of ET Unit Ownership—Tax Consequences of Unit Ownership—Treatment of Distributions,” “—Tax Consequences of Unit Ownership—Basis of Units” and “—Recognition of Gain or Loss on Redemption of New ET Preferred Units.”

Investment in the new ET preferred units by non-U.S. persons and tax-exempt investors, such as employee benefit plans and individual retirement accounts (“IRAs”) raises issues unique to them. The IRS may determine that distributions on the new ET preferred units constitute guaranteed payments for the use of capital. The treatment of guaranteed payments for the use of capital to tax-exempt investors is not certain and such payments may be treated as unrelated business taxable income for U.S. federal income tax purposes. Distributions to non-U.S. holders of new ET preferred units will be subject to withholding taxes. If the amount of withholding exceeds the amount of U.S. federal income tax actually due, non-U.S. new ET preferred unitholders may be required to file U.S. federal income tax returns in order to seek a refund of such excess. If you are a non-U.S. person or tax-exempt entity, you should consult your tax advisor with respect to the consequences of owning the new ET preferred units. Please see “Material U.S. Income Tax Consequences of ET Unit Ownership—Tax-Exempt Organizations and Other Investors.”

Energy Transfer, Crestwood or certain subsidiaries of Crestwood may engage in transactions that cause former Crestwood unitholders to be subject to taxation in a different manner than other ET unitholders.

In connection with the merger, Energy Transfer, Crestwood, or certain subsidiaries of Crestwood may undertake restructuring transactions. These transactions could require Energy Transfer to allocate items of gain or loss realized on property contributed to Energy Transfer in the merger solely to former Crestwood unitholders in respect of the ET units received in the merger. As a result, former Crestwood unitholders could be treated differently from holders of pre-merger ET units for U.S. federal income tax purposes, and no special distributions will be made to former Crestwood unitholders with respect to any tax liability for such transactions. Please see “Material U.S. Federal Income Tax Consequences of ET Unit Ownership—Tax Consequences of Unit Ownership—Allocation of Income, Gain, Loss and Deduction.”

Holders of ET units received in the merger will generally be subject to the tax risks that apply to existing ET unitholders.

Following the merger, in addition to the risks described above, for U.S. federal income tax purposes, holders of ET units received in the merger will continue to be subject to the risks that holders of ET units are currently subject to, which are described in Energy Transfer’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as updated by the subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” for the location of information incorporated by reference in this proxy statement/prospectus.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document includes “forward-looking statements” about Energy Transfer and Crestwood that are subject to risks and uncertainties. All statements other than statements of historical fact included in this document are forward-looking statements. Statements using words such as “anticipate,” “believe,” “intend,” “project,” “plan,” “expect,” “continue,” “estimate,” “goal,” “forecast,” “may,” “could,” “will,” “predict,” “potential,” “should,” “would,” “seek,” or similar expressions help identify forward-looking statements.

Except for their respective obligations to disclose material information under U.S. federal securities laws, neither Energy Transfer nor Crestwood undertakes any obligation to release publicly any revisions to any forward-looking statements, to report events or circumstances after the date of this document, or to report the occurrence of unanticipated events.

Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Important factors that could cause such differences include, but are not limited to:

 

   

the expected timing of closing the merger and benefits of the merger;

 

   

the matters described in the section titled “Risk Factors;”

 

   

cyclical or other downturns in demand;

 

   

adverse changes in economic or industry conditions;

 

   

changes in the securities and capital markets;

 

   

changes affecting customers or suppliers;

 

   

changes in laws or regulations, third-party relations and approvals, and decisions of courts, regulators and/or governmental bodies;

 

   

effects of competition;

 

   

developments in and losses resulting from claims and litigation;

 

   

changes in operating conditions and costs;

 

   

the extent of Energy Transfer’s or Crestwood’s ability to achieve its operational and financial goals and initiatives;

 

   

Energy Transfer’s continued taxation as a partnership and not as a corporation;

 

   

the incurrence of significant transaction and other costs in connection with the merger exceeding current expectations;

 

   

ultimate timing, outcome and results of integrating the operations of Energy Transfer and Crestwood, including the risk that the businesses may not be integrated successfully or that anticipated synergies or other benefits expected from the mergers may not be realized; and

 

   

the effect of the merger and its announcement and/or completion on Energy Transfer’s and Crestwood’s business, relationships, plans, operations and financial condition.

In addition, the acquisition of Crestwood by Energy Transfer is subject to the satisfaction of certain conditions and the absence of events that could give rise to the termination of the merger agreement, the possibility that the merger does not close, risks that the proposed acquisition disrupts current plans and operations and business relationships or poses difficulties in attracting or retaining employees, the possibility that the costs or difficulties related to the integration of the two companies will be greater than expected and the possibility that the anticipated benefits from the merger cannot or will not be fully realized.

 

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All written and oral forward-looking statements attributable to Energy Transfer or Crestwood or persons acting on behalf of Energy Transfer or Crestwood are expressly qualified in their entirety by such factors. For additional information with respect to these factors, please see the section titled “Where You Can Find More Information.”

 

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INFORMATION ABOUT THE COMPANIES

Energy Transfer LP

Energy Transfer is a publicly-traded Delaware limited partnership owning and operating a diversified portfolio of energy assets. Energy Transfer’s core operations include complementary natural gas midstream, intrastate and interstate transportation and storage assets; crude oil, NGLs and refined product transportation and terminalling assets; and NGL storage and fractionation. Energy Transfer also owns Lake Charles LNG Company, as well as limited partner interests in and the general partner interests of the publicly-traded master limited partnerships, Sunoco LP and USA Compression Partners, LP.

Energy Transfer’s executive offices are located at 8111 Westchester Drive, Suite 600, Dallas, Texas 75225, and its telephone number is (214) 981-0700.

Crestwood Equity Partners LP

Crestwood, a Delaware limited partnership formed in March 2001, is a master limited partnership that develops, acquires, owns or controls, and operates primarily-fee based assets and operations within the energy midstream sector. Headquartered in Houston, Texas, Crestwood provides broad-ranging infrastructure solutions across the value chain to service premier liquids-rich natural gas and crude oil shale plays across the United States. Crestwood owns and operates a diversified portfolio of NGL, crude oil, natural gas and produced water gathering, processing, storage, disposal and transportation assets that connect fundamental energy supply with energy demand across North America. Crestwood’s common units representing limited partner interests are listed on the NYSE under the symbol “CEQP” and its preferred units representing limited partner interests are listed on the NYSE under the symbol “CEQP-P.”

Crestwood is a holding company. All of Crestwood’s consolidated operating assets are owned by or through its wholly owned subsidiary, Crestwood Midstream Partners LP, a Delaware limited partnership.

Crestwood’s principal executive offices are located at 811 Main Street, Suite 3400, Houston, Texas 77002, and its telephone number is (832) 519-2200.

Pachyderm Merger Sub, LLC

Merger Sub is a Delaware limited liability company and a wholly owned subsidiary of Energy Transfer. Merger Sub was formed on August 11, 2023 solely for the purpose of consummating the merger and has no operating assets. Merger Sub has not carried on any activities to date, except for activities incidental to its formation and activities undertaken in connection with the transactions contemplated by the merger agreement.

Merger Sub’s principal executive offices are located at 8111 Westchester Drive, Suite 600, Dallas, Texas 75225, and its telephone number is (214) 981-0700.

 

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SPECIAL MEETING OF CRESTWOOD UNITHOLDERS

This section contains information about the special meeting of Crestwood unitholders that has been called, among other reasons, to approve and adopt the merger agreement and the transactions contemplated thereby and to approve, on an advisory (non-binding) basis, specified compensation that may be received by Crestwood’s named executive officers in connection with the merger. This document is being furnished to Crestwood unitholders in connection with the solicitation of proxies by the Crestwood board of directors to be used at the special meeting. Crestwood is first mailing this document and the enclosed proxy card on or about                  , 2023.

Date, Time and Place of the Special Meeting

A virtual special meeting of Crestwood unitholders will be held at www.virtualshareholdermeeting.com/CEQP2023SM on                 , 2023, starting at                  a.m., central time (unless it is adjourned or postponed to a later date).

The special meeting can be accessed by visiting www.virtualshareholdermeeting.com/CEQP2023SM, where Crestwood unitholders will be able to participate and vote online during the special meeting. Crestwood encourages its unitholders to access the meeting 15 minutes prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this proxy statement/prospectus. This proxy statement/prospectus is first being mailed to Crestwood’s unitholders on or about                 , 2023.

Participating in the Special Meeting

All Crestwood unitholders as of the close of business on the record date are invited to attend the special meeting virtually. Persons who are not Crestwood unitholders may attend only if invited by Crestwood.

To be admitted to the special meeting at www.virtualshareholdermeeting.com/CEQP2023SM, unitholders must enter the 16-digit control number found on their proxy card or voting instruction form. Once properly admitted to the special meeting, unitholders of record as of the record date may vote their units by following the instructions available on the meeting website during the meeting and may also view the complete list of unitholders entitled to vote at the special meeting. Technical support will be available on the virtual meeting website beginning 15 minutes prior to the start of the special meeting. The technical support offered through this service is designed to address difficulties related to the virtual meeting website, and it is recommended that you contact your bank, broker or other nominee should you be unable to locate your 16-digit control number.

Crestwood unitholders may submit questions during the special meeting. As part of the special meeting, Crestwood will hold a live question and answer session during which we intend to answer questions submitted during the meeting in accordance with the special meeting procedures which are pertinent to Crestwood and the meeting matters, as time permits. Questions may be submitted during the special meeting through www.virtualshareholdermeeting.com/CEQP2023SM. Questions and answers will be grouped by topic and substantially similar questions will be grouped and answered once.

Regardless of whether you plan to participate in the special meeting, it is important that your Crestwood units be represented and voted at the special meeting. Accordingly, we encourage you to vote in advance of the special meeting.

We encourage you to access the meeting 15 minutes prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this proxy statement/prospectus.

Purpose of the Special Meeting

 

   

Proposal 1: To consider and vote upon a proposal to approve and adopt the merger agreement and the transactions contemplated thereby;

 

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Proposal 2: To consider and cast an advisory (non-binding) vote on specified compensation that may be received by Crestwood’s named executive officers in connection with the merger;

 

   

Proposal 3: To consider and vote upon any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal to approve and adopt the merger agreement and the transactions contemplated thereby; and

 

   

Proposal 4: To transact such other business as may properly come before the special meeting and any adjournment or postponement thereof (at the present time, Crestwood knows of no other matters that will be presented for consideration at the special meeting).

Recommendation of the Crestwood Board of Directors

The Crestwood board of directors has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Crestwood and its unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, (iv) resolved to recommend adoption of the merger agreement by the Crestwood unitholders and (v) directed that the merger agreement be submitted to the Crestwood unitholders for adoption. In addition, the Crestwood board of directors recommends that the Crestwood unitholders vote to approve, on an advisory (non-binding) basis, specified compensation that may be received by Crestwood’s named executive officers in connection with the merger and to approve any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal.

Crestwood unitholders should carefully read this document in its entirety for more detailed information concerning the merger agreement and the transactions contemplated thereby. In particular, Crestwood unitholders are directed to the merger agreement, which is attached hereto as Annex A.

Record Date; Unitholders Entitled to Vote; Outstanding Units Held

The Crestwood board of directors has designated the close of business on                , 2023 as the “record date” that will determine the unitholders who are entitled to receive notice of, and to vote at, the special meeting or at any adjournment or postponement of the special meeting. Only holders of record at the close of business on the record date are entitled to vote at the special meeting. At the close of business on the record date, there were (i)                  Crestwood common units outstanding, held by approximately                  holders of record and (ii)                  Crestwood preferred units outstanding, held by approximately                 holders of record. Each Crestwood common unitholder is entitled to one vote per Crestwood common unit held. Each Crestwood preferred unitholder is entitled to a number of votes equal to the number of votes such holder would have had if all Crestwood preferred units held by such holder had been converted into Crestwood common units as of the record date. As of the date hereof, the Crestwood preferred units are convertible into Crestwood common units on a 10-for-1 basis. As a result, each Crestwood preferred unitholder will have one vote for every ten Crestwood preferred units held as of the record date. There are no other classes of Crestwood units outstanding that are entitled to vote at the special meeting. Accordingly, the total number of units entitled to vote at the special meeting, giving effect to the Crestwood preferred units, on an as-converted basis, is                 .

A complete list of Crestwood unitholders of record who are entitled to vote at the special meeting will be available for a period of at least ten days prior to the special meeting. If you would like to inspect the list of Crestwood unitholders of record, please call the Investor Relations department at (832) 519-2200 to schedule an appointment or request access. A certified list of eligible Crestwood unitholders will be available for inspection during the special meeting at www.virtualshareholdermeeting.com/CEQP2023SM by entering the 16-digit control number provided on your proxy card or voting instruction form.

 

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Quorum

A “quorum” shall consist of the holders of record of a majority of the issued and outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, present online or by proxy at the special meeting. There must be a quorum for the special meeting to be held. If you submit a timely, properly executed proxy or voting instruction form, then you will be considered part of the quorum so long as your units are voted on at least one item of business, other than a procedural motion. Abstentions will be counted for purposes of determining whether there is a quorum at the special meeting. Because it is expected that all of the matters to be voted on at the special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your bank, broker or other nominee, your units will not count towards determining whether a quorum is present and your units will not be voted on any of the proposals.

Failure to Vote; Abstentions

An abstention occurs when a unitholder is present for purposes of a quorum by virtually attending the special meeting and either does not vote or submits a ballot marked “abstain.” An abstention also occurs when a unitholder does not attend the special meeting and instead submits a proxy with an “abstain” instruction. Abstentions will be counted for purposes of determining whether there is a quorum at the special meeting.

The failure of any Crestwood unitholder to submit a vote (e.g., by not submitting a proxy or not voting online) and any abstention by a Crestwood unitholder will have the same effect as a vote “AGAINST” each of the merger proposal and the advisory compensation proposal. In addition, abstentions are counted as units present and entitled to vote and will have the same effect as votes “AGAINST” the adjournment proposal.

Broker Non-Votes

Under the rules that govern brokers who have record ownership of units that they hold in street name for their clients who are the beneficial owners of the units, brokers have the discretion to vote such units on routine matters, but not on non-routine matters absent direction from the unitholder, including the merger proposal, the advisory compensation proposal and the adjournment proposal. Broker non-votes occur when units held by a broker are not voted with respect to a proposal because (1) the broker has not received voting instructions from the beneficial owner, and (2) the broker lacks the authority to vote the units at his or her discretion. Because it is expected that all of the matters to be voted on at the special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your bank, broker or other nominee, your units will not count towards determining whether a quorum is present and your units will not be voted on any of the proposals.

Because approval of the merger proposal and the advisory compensation proposal requires the affirmative vote of at least a majority of the outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class, a broker non-vote will have the same effect as a vote “AGAINST” approval of the merger proposal and the advisory compensation proposal. Because approval of the adjournment proposal requires the affirmative vote of a majority of the Crestwood common units, and Crestwood preferred units, on an as-converted basis, voting as a single class, present online or by proxy at the special meeting, a broker non-vote will have no effect on the approval of the adjournment proposal.

Required Vote

The merger proposal must be approved and adopted by the affirmative vote of the holders of a majority of the outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class. Any failure to vote, abstention or broker non-vote will have the same effect as a vote “AGAINST” the merger proposal.

 

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Approval of the advisory vote on the advisory compensation proposal requires the affirmative vote of the holders of a majority of the Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class. Any failure to vote, abstention or broker non-vote will have the same effect as a vote “AGAINST” the advisory compensation proposal.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class, present online or by proxy at the special meeting. Abstentions will have the same effect as a vote “AGAINST” a proposal to adjourn the special meeting. Broker non-votes will have no effect on the adjournment proposal.

Units Beneficially Owned by Directors and Executive Officers

As of September 8, 2023, the members of the Crestwood board of directors and executive officers of Crestwood beneficially owned an aggregate of 5,965,970 Crestwood common units and zero Crestwood preferred units. These units represent in total approximately 5.3% of the total voting power of Crestwood’s voting securities on an as-converted basis.

Proxies

You may vote online at the special meeting or by submitting a proxy. Please submit your proxy even if you plan to attend the special meeting. If you attend the special meeting, you may vote online, thereby canceling any proxy previously given.

Voting instructions are included on your proxy card. If you properly give your proxy and submit it to Crestwood in time for it to be voted, one of the individuals named as your proxy will vote your units as you have directed. You may vote for or against the proposals or abstain from voting.

Units Held in Street Name

Crestwood unitholders who hold Crestwood common units or Crestwood preferred units in a brokerage account or through a bank, broker or other nominee (“street name” unitholders) who wish to vote at the special meeting should be provided a 16-digit control number or voting instruction form by the bank, broker or other nominee that holds their units. If you are a street name unitholder and this has not occurred, contact the bank, broker or other nominee that holds your units of record. A number of banks and brokerage firms participate in a program that also permits “street name” unitholders to direct their vote by telephone or over the Internet. If your units are held in an account at a bank or brokerage firm that participates in such a program, you may direct the vote of these units by telephone or over the Internet by following the voting instructions enclosed with the voting instruction form from the bank or brokerage firm. The Internet and telephone procedures are designed to authenticate unitholders’ identities, to allow unitholders to give their voting instructions and to confirm that those instructions have been properly recorded. Votes directed by telephone or over the Internet through such a program must be received by 11:59 p.m. Central Time (CT), on                     , 2023. Directing the voting of your units will not affect your right to vote at the special meeting if you decide to attend the special meeting; however, you must use the 16-digit control number set forth on the voting instruction form received from your bank, broker or other nominee to vote your shares held in “street name” at the special meeting. Voting at the special meeting using the 16-digit control number set forth on the voting instruction form received from your bank, broker or other nominee prior to the deadline described above will automatically cancel any voting directions you have previously given by telephone or over the Internet with respect to your shares.

Absent specific instructions from you, your bank, broker or other nominee is not empowered to vote your Crestwood common units or Crestwood preferred units at the special meeting. Because it is expected that all of the matters to be voted on at the special meeting will be non-routine under NYSE rules, brokers will not have discretionary authority to vote on any such proposal; therefore, if you do not provide voting instructions to your bank, broker or other nominee, your units will not count towards determining whether a quorum is present and your units will not be voted on any of the proposals.

 

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How to Submit Your Proxy

By Mail: To submit your proxy by mail, simply mark your proxy, date and sign it, and if you are a record holder of Crestwood common units or Crestwood preferred units, return it in the postage-paid envelope provided. If the envelope is missing, please address your completed proxy card to the address on your proxy card. If you are a beneficial owner, please refer to your voting instruction form provided to you by your bank, broker, custodian or record holder.

By Telephone: If you are a Crestwood unitholder of record, you can submit your proxy by telephone by calling the toll-free telephone number on your proxy card. Telephone voting is available 24 hours a day and will be accessible until 12:00 a.m. Eastern time on                 , 2023. Easy-to-follow voice prompts allow you to submit your proxy and confirm that your instructions have been properly recorded. If you are a beneficial owner, please refer to your voting instruction form provided by your bank, broker, custodian or record holder for information on whether telephone voting is offered. If you submit your proxy by telephone you do not need to return your proxy card. If you are located outside the United States, Canada and Puerto Rico, please read your proxy card or other materials for additional instructions.

By Internet: You can also choose to submit your proxy online at www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 12:00 a.m. Eastern time on                 , 2023. If you are a beneficial owner, please refer to your voting instruction form provided by your bank, broker, custodian or record holder for information on whether internet voting is offered. As with telephone voting, you will be given the opportunity to confirm that your instructions have been properly recorded. If you submit your proxy on the internet, you do not need to return your proxy card.

Revoking Your Proxy

If you submit a completed proxy card with instructions on how to vote your Crestwood common units or Crestwood preferred units and then wish to revoke your instructions, you should submit a written notice of revocation to Crestwood GP as soon as possible. You may revoke your proxy by internet, telephone or mail at any time before it is voted by:

 

   

timely delivery of a valid, later-dated proxy or timely submission of a later-dated proxy by telephone or internet;

 

   

written notice to Crestwood GP before the special meeting that you have revoked your proxy; or

 

   

participating in and voting online at the special meeting.

Adjournments and Postponements

Any adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the merger proposal requires the affirmative vote of the holders of a majority of the Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class, present online or by proxy at the special meeting. No notice of the adjourned special meeting will be given so long as the time and place to which the special meeting is adjourned are announced at the special meeting at which the adjournment is taken, the adjournment is for no more than 45 days, a new record date is not fixed and, at the adjourned special meeting, only such business is transacted as might have been transacted at the original special meeting.

In addition, at any time prior to convening the special meeting, the special meeting may be postponed without the approval of Crestwood unitholders. If postponed, Crestwood will publicly announce the new meeting date. Similar to adjournments, any postponement of the special meeting for the purpose of soliciting additional proxies will allow Crestwood unitholders who have already sent in their proxies to revoke them at any time prior to their use.

 

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Inspector of Election

The Crestwood board of directors has appointed a representative of Broadridge Investor Communication Solutions to act as the inspector of election at the special meeting.

Proxy Solicitation

Energy Transfer and Crestwood will each bear their own costs related to the merger and the retention of any information agent or other service provider in connection with the merger, except for the expenses incurred in connection with the filing, printing and mailing of this document, which will be borne by Energy Transfer. This proxy solicitation is being made by Crestwood on behalf of the Crestwood board of directors. Crestwood has hired Innisfree M&A Incorporated to assist in the solicitation of proxies. Innisfree M&A Incorporated may solicit proxies by personal interview, mail, telephone and electronic communications. We will pay $45,000 for additional proxy solicitation services. In addition to this mailing, solicitations may also be made by personal interview, mail, telephone and electronic communications by directors, officers or employees of Crestwood or its affiliates without additional compensation.

Householding of Special Meeting Materials

Unless Crestwood has received contrary instructions, Crestwood may send a single copy of this proxy statement/prospectus to any household at which two or more unitholders reside if Crestwood believes the unitholders are members of the same family. Each unitholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce Crestwood’s expenses.

If you would like to revoke your consent to householding and in the future receive your own set of proxy materials, or if your household is currently receiving multiple copies of the same items and you would like in the future to receive only a single copy at your address, please contact Investor Relations at (832) 519-2200, or write to Crestwood Equity Partners LP, 811 Main Street, Suite 3400, Houston, Texas 77002, and indicate your name, the name of each of your brokerage firms or banks where your common units are held and your account numbers. The revocation of a consent to householding will be effective 30 days following its receipt. You will also have an opportunity to opt in or opt out of householding by contacting your bank or broker.

Other Business

The Crestwood board of directors is not currently aware of any business to be acted upon at the special meeting other than the matters described in this document. If, however, other matters are properly brought before the special meeting, the persons appointed as proxies will have discretion to vote or act on those matters as in their judgment is in the best interest of Crestwood and its unitholders.

 

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PREFERRED CONSENT SOLICITATION

Separately from the solicitation of votes pursuant to the accompanying proxy statement/prospectus, at the direction of Energy Transfer pursuant to certain provisions of the merger agreement (see “The Merger Agreement—Other Covenants and Agreements”), Crestwood is also soliciting consents from Crestwood preferred unitholders to amend certain terms of the Crestwood Partnership Agreement relating to the Crestwood preferred units proposed by Energy Transfer pursuant to the merger agreement. The purpose of the Preferred Consent Solicitation is to (i) increase the cash redemption price for the Crestwood preferred units in connection with a cash redemption election in the merger, and (ii) conform certain terms of the Crestwood preferred units with Energy Transfer’s other outstanding series of preferred units in order to simplify its capital structure following the merger. The Preferred Consent Solicitation is being conducted by Crestwood pursuant to a proxy statement on Schedule 14A filed by Crestwood with the Securities and Exchange Commission on                 , 2023 and mailed to the Crestwood preferred unitholders on or about the same date. Pursuant to the Preferred Consent Solicitation, Crestwood is seeking to amend the Crestwood Partnership Agreement as follows:

 

   

Section 5.8(e)(ii)(D) of the Crestwood Partnership Agreement provides Crestwood preferred unitholders the right to have Crestwood preferred units redeemed at a price equal to 101% of the Preferred Unit Price (as defined in the Crestwood Partnership Agreement) in the event of a Change of Control (other than a Cash COC Event) (as such terms are defined in the Crestwood Partnership Agreement). The proposed amendments would permit Crestwood to increase the redemption price payable to Crestwood preferred unitholders making a Redemption Election pursuant to Section 5.8(e)(ii)(D) of the Crestwood Partnership Agreement in connection with the merger from 101% of the Preferred Unit Price (or $9.218573 per Crestwood preferred unit) to                 % of the Preferred Unit Price (or $                 per Crestwood preferred unit);

 

   

Section 5.8(c)(i) of the Crestwood Partnership Agreement provides that in the event Crestwood fails to pay in full in cash any distribution (or portion thereof) which a Crestwood preferred unitholder is entitled to receive for a quarter under the Crestwood Partnership Agreement, (i) then the Preferred Unit Distribution Amount (as defined in the Crestwood Partnership Agreement) for the immediately following quarter will by $0.2567 per quarter (the “Deficiency Rate”) and (ii) any accrued and unpaid distributions will increase at a rate of 2.8125% per quarter. The proposed amendment would eliminate the application of (a) the Deficiency Rate with respect to distributions payable to the Crestwood preferred unitholders during any quarter in which distributions are accrued and unpaid and (b) the 2.8125% rate of increase per quarter to any accrued and unpaid distributions;

 

   

Section 5.8(c)(i) of the Crestwood Partnership Agreement provides that each Crestwood preferred unit is entitled to share in any special distributions by Crestwood of cash, securities or other property pro rata with the Crestwood common units as if the Crestwood preferred units had converted into Crestwood common units. Special distributions do not include regular, quarterly distributions paid in the normal course pursuant to the Crestwood Partnership Agreement, so long as such distributions are not in excess of 130% of the quarterly distribution rate for the prior quarter. The proposed amendment would provide Crestwood preferred unitholders the right to receive (and share pro rata with Crestwood common unitholders in) any portion of any quarterly cash distribution made in the normal course to Crestwood common unitholders that is in excess of an amount that is the greater of (i) the amount of the highest previously paid quarterly cash distribution after the date of the merger and (ii) the amount equal to 115% of the quarterly cash distribution for the immediately preceding quarter; and

 

   

Section 5.8(d) of the Partnership Agreement provides that Crestwood preferred unitholders are entitled to vote as a separate class on any matter that adversely affects the rights, powers, privileges or preferences of the Crestwood preferred units in relation to other classes of limited partner interests in Crestwood. The current Voting Threshold (as defined below) provides that the affirmative vote of a majority of the Crestwood preferred units is required to approve such matters, except that the affirmative vote of two-thirds of the Crestwood preferred units is required (such applicable threshold, the “Voting Threshold”) to approve matters (i) that alter the rights and obligations of the Crestwood

 

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preferred units in any material respect, increase or decrease the authorized number of Crestwood preferred units, or otherwise adversely affect the Crestwood preferred units, or (ii) when the three largest Crestwood preferred unitholders collectively own two-thirds of the Crestwood preferred units or certain of Crestwood initial Crestwood preferred unitholders own at least 35% of the Crestwood preferred units. Section 5.8(d) of the Crestwood Partnership Agreement also provides that Crestwood may, without the affirmative vote of two-thirds of the Crestwood preferred units, create and issue Junior Securities (as defined in the Crestwood Partnership Agreement) and Parity Securities (as defined in the Crestwood Partnership Agreement) in an unlimited amount with respect to Junior Securities, and, with respect to Parity Securities, in an amount not to exceed $300 million in aggregate face value and that shall not be convertible into more than 48,125,000 Crestwood common units, subject to certain restrictions set forth in the Crestwood Partnership Agreement. The proposed amendment would conform the voting rights of Crestwood preferred unitholders to the voting rights of holders of Energy Transfer’s other outstanding series of preferred units by (a) eliminating the right of Crestwood preferred unitholders to vote together, on an as-converted basis, with the Crestwood common units as a single class, (b) providing that the affirmative vote of holders of at least two-thirds of the outstanding Crestwood preferred units, voting as a separate class, is required to adopt any amendment to the Crestwood Partnership Agreement that the Crestwood GP determines would have a material and adverse effect on the rights of the Crestwood preferred units, and (c) providing that the affirmative vote of holders of at least two-thirds of the outstanding Crestwood preferred units, voting together as a class with other parity securities, is required to (1) create or issue any Parity Securities if cumulative distributions on the Crestwood preferred units are in arrears or (2) create or issue any Senior Securities (as defined in the Crestwood Partnership Agreement).

If the requisite consents are obtained in the Preferred Consent Solicitation, the adoption of the proposed amendments will be conditioned on the satisfaction or waiver of the conditions to the closing of the merger. If the Pre-Merger Special Distribution is declared and paid prior to the closing of the merger, the amendments to the Crestwood Partnership Agreement would not impact the Pre-Merger Special Distribution. If such amendments are adopted (i) the terms of any new ET preferred units issued to the Crestwood preferred unitholders electing to receive such units in the merger will be substantially similar to the terms of the Crestwood preferred units as so amended and (ii) the redemption price payable to the Crestwood preferred unitholders who make a Redemption Election will be $                 per Crestwood preferred unit. The merger is not conditioned upon Crestwood obtaining the requisite consents to amend the terms of the Crestwood Partnership Agreement in the Preferred Consent Solicitation. If the requisite consent in the Preferred Consent Solicitation is not obtained, the current terms of the Crestwood Partnership Agreement, including all of the terms of the Crestwood preferred units, will remain unchanged. For additional information, Crestwood preferred unitholders should read the Crestwood Consent Solicitation Statement.

 

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PROPOSAL 1: THE MERGER

Effects of the Merger

Upon satisfaction or waiver of the conditions to closing in the merger agreement, on the closing date, Crestwood will merge with and into Merger Sub, a wholly owned subsidiary of Energy Transfer formed for the purpose of effecting the merger, with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer. At the effective time, (i) each Crestwood common unit issued and outstanding immediately prior to the effective time (other than Excluded Units (as defined in the merger agreement)) will be converted into the right to receive 2.07 ET common units and (ii) each Crestwood Class A unit issued and outstanding immediately prior to the effective time will be converted into the right to receive 1.828 Energy Transfer Class B units.

In addition, each Crestwood preferred unit outstanding immediately prior to the effective time will, at the election of the Crestwood preferred unitholder, in accordance with the Crestwood Partnership Agreement, (i) convert into Crestwood common units, at the then-applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time, (ii) convert into new ET preferred units or (iii) be redeemed in exchange for cash or Crestwood common units, at the sole discretion of Crestwood GP, at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $                 per Crestwood preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption.

Crestwood preferred unitholders that receive Crestwood common units pursuant to the foregoing clauses (i) or (iii) will be entitled to receive the common unit merger consideration at the effective time. If no election is made by a holder of Crestwood preferred units, such holder will be deemed to have elected to receive new ET preferred units. Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have elected to have such Crestwood preferred units redeemed pursuant to a Redemption Election as described in clause (iii) above.

Crestwood will take all actions as may be necessary so that at the effective time, each outstanding award of restricted units and performance units of Crestwood will be treated as described in “The Merger Agreement—Crestwood Employee Equity-Based Awards.”

Background of the Merger

The terms of the merger are the result of arm’s length negotiations between Energy Transfer and Crestwood. The following is a summary of the events leading up to the signing of the merger agreement and the key meetings, negotiations, discussions and actions by and between Energy Transfer and Crestwood and their respective advisors that preceded the public announcement of the acquisition.

As part of Crestwood’s ongoing strategic planning process, the Crestwood board of directors, together with Crestwood management, regularly reviews and assesses Crestwood’s long-term strategic plans and goals, opportunities, overall industry trends, the competitive environment in which Crestwood operates and Crestwood’s short- and long-term performance. As part of these reviews, the Crestwood board of directors, with the assistance of Crestwood’s advisors, considered whether various strategic actions, including business combination transactions, would be in the best interests of Crestwood and would enhance value for Crestwood unitholders.

At Crestwood’s August 2019 strategic offsite meeting with the Crestwood board of directors, Crestwood management provided the Crestwood board of directors with a detailed review of the midstream and upstream industry trends, capital markets movements, and key drivers of long-term value including (i) operational and

 

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financial scale, (ii) balance sheet strength and flexibility, (iii) vertical integration of the midstream value chain, (iv) free cash flow and distributable cash flow per unit growth, and (v) a track record of generating strong returns on invested capital. In connection with this review, Crestwood management also discussed the current and expected future environment for mergers, acquisitions, divestitures, reorganizations and joint ventures, including a list of potential acquisition candidates for Crestwood. Additionally, Crestwood analyzed the candidates of companies and partnerships which might ultimately acquire Crestwood and the merits and considerations for each counterparty including scale, absolute and relative valuation, commercial and operational fit, corporate structure and synergy potential. The ultimate strategic conclusions of the August 2019 strategic board meeting were that developing industry and market trends were very likely to lead to further consolidation in the midstream sector and Crestwood’s short-term and long-term strategies should be focused on enhancing its competitive position to participate in longer-term industry consolidation.

Over the course of 2019 through 2022, Crestwood management, together with its board of directors, undertook multiple strategic and financial steps that it believed would strengthen Crestwood’s competitive position in the marketplace, enhance long-term value for unitholders and better position Crestwood for future participation in industry consolidation. Such actions included regional acquisitions in the Williston Basin and Delaware Basin to increase operational and financial scale in its core operating areas, as well as acquisitions of the non-operating equity interests from joint venture partners in both the Powder River Basin and Delaware Basin. Further, to maintain balance sheet strength and flexibility and further streamline its business portfolio, Crestwood divested non-core, lower-growth, gathering and processing assets in the Barnett Shale and Marcellus Shale and its joint venture interests in natural gas storage assets in the Northeast and South Texas. Lastly, to enhance corporate governance and create better alignment with unitholders, Crestwood acquired its general partner interest from First Reserve and transformed its governance structure to a publicly-elected board of directors.

In addition to the strategic steps executed on over the course of 2019 to 2022, Crestwood management together with its board of directors, also evaluated several larger strategic transactions with other publicly-traded midstream corporations and partnerships. Beginning in the third quarter of 2020, Crestwood’s management and board of directors evaluated a business combination in which a larger, publicly-traded midstream company would spin out its sizable gathering and processing assets from its broader portfolio of midstream assets and merge those gathering and processing assets into Crestwood. This transaction structure was discussed to varying degrees with three separate counterparties, all of which were large North American oil and gas infrastructure companies. One party, Party A, took interest in progressing its evaluation of the potential transaction, and Crestwood and Party A executed a confidentiality agreement in mid-2020 to exchange certain confidential information on customary terms. Such confidentiality agreement did not include a standstill provision. After several months of evaluation and discussions between both parties, Party A elected to terminate discussions regarding the potential transaction after having reviewed the transaction with its board of directors and determining the transaction was not aligned with its overall strategic objectives. Additionally, in June of 2021, Crestwood management held a meeting with the management team of the general partner of Party B, a large, publicly-traded gathering and processing partnership, to discuss the merits of a potential business combination. Both parties agreed to evaluate the potential transaction further based on publicly available information and both Crestwood and the general partner of Party B continued discussions for several months. Ultimately, the general partner of Party B informed Crestwood that Party B did not have interest in pursuing a transaction with Crestwood at that time.

Over the course of 2022 at Crestwood’s regularly scheduled meetings with its board of directors, Crestwood management provided updates on its outlook for the industry and financial markets and continued to progress its views on the rationale for consolidation as a potential path to enhance unitholder value. As a part of those discussions, Crestwood management and its board of directors discussed the completion of its multi-year strategic repositioning of Crestwood to enhance scale and concentration in its core operating areas in the Williston, Delaware, and Powder River basins as well as focusing its supply and logistics group predominantly on the transportation, storage and marketing of natural gas liquids for select demand markets in Crestwood’s

 

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regional service areas. Crestwood management highlighted the risks and opportunities embedded in its concentrated gathering and processing portfolio and discussed the business merits of expanding its service offerings further down the midstream value chain to gain more connectivity to ultimate demand markets. Additionally, Crestwood management provided detailed reviews of the debt and equity capital markets, including periodic updates regarding Crestwood’s cost of capital and increasing interest rates as well as the continuing limitations for companies like Crestwood to access the public equity markets in any scale. Additionally, Crestwood management and the board of directors from time to time discussed the private equity markets and other alternative sources of structured equity capital citing some of the limiting factors and strategic considerations to seeking those forms of capital for growth opportunities. As a result of limited access to cost effective capital, Crestwood management and its board of directors discussed the challenges of pursuing additional growth opportunities and alternative potential paths to long-term value creation including potential business combination transactions. On multiple occasions, including during its regularly scheduled meetings in August and November of 2022, Crestwood management reviewed with the board of directors a list of potential candidates for consolidation that would be expected to immediately enhance the value of Crestwood’s assets through integration to the downstream markets, reduce risk to a heavily-weighted gathering and processing portfolio and still preserve substantial upside potential for Crestwood’s unitholders.

On December 19, 2022, Mr. Robert G. Phillips, Founder, Chairman and Chief Executive Officer of Crestwood met with a representative of Intrepid Partners, LLC (“Intrepid”) to discuss the current outlook for the industry, along with an update on Crestwood’s business outlook and current strategic priorities. As a part of that meeting, Mr. Phillips and Intrepid discussed industry consolidation at length and Mr. Phillips updated Intrepid about recent discussions with Crestwood’s board of directors. Mr. Phillips discussed Crestwood’s potential interest in participation in industry consolidation as a path to enhance value for Crestwood’s unitholders and mitigate some of the longer-term challenges and risks that are inherent for a predominantly gathering and processing focused midstream company with smaller scale and market capitalization. Intrepid and Mr. Phillips discussed potential acquirers of Crestwood that management had discussed with its board of directors in its regularly scheduled August and November 2022 board meetings. Intrepid offered its perspective on the merits and considerations related to each candidate, along with the potential interest level and actionability, in pursuing a business combination with Crestwood. At the conclusion of the meeting, Mr. Phillips informed Intrepid that Crestwood management and its board of directors had elected not to conduct a broad marketing process, as they felt that confidentiality would be difficult to maintain and that a process could become highly disruptive to Crestwood’s personnel, business operations, customers, and unitholders. However, Mr. Phillips informed Intrepid that if industry consolidation was a topic of conversation as Intrepid made its ordinary course visits to current and prospective midstream clients to keep Crestwood apprised of such conversations as the Crestwood board of directors regularly reviews and assesses Crestwood’s strategic opportunities and would be open to consolidation opportunities Intrepid may first learn of.

In February 2023, the Crestwood board of directors approved Crestwood’s five-year financial plan. Such plan formed the basis for the assumptions underlying the financial forecast that would become Case One as described in “Unaudited Prospective Financial Information Regarding Crestwood.”

Between March and May 2023, Intrepid had ordinary course meetings and dialogue with Party A and three other midstream companies. During these meetings, among other topics, Intrepid highlighted Crestwood as a potential acquisition target to determine interest in a potential transaction. The feedback during those conversations was, among other things, that a business combination with Crestwood at this time was unlikely due to several reasons including: potential regulatory concerns as part of a combination, limited business overlap with Crestwood in its largest operating basins, potential Crestwood unitholder tax leakage due to a potential acquirer’s C-Corp structure, and competing strategic priorities.

On April 13, 2023, Intrepid met with Energy Transfer as part of its ordinary course meetings and dialogue and, among other topics, highlighted Crestwood as a potential acquisition target to determine Energy Transfer’s interest in a potential transaction. Following the meeting, Energy Transfer expressed to Intrepid some interest

 

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and indicated it would further evaluate internally whether there was sufficient appeal to pursue a potential transaction. Following the meeting, Energy Transfer analyzed Crestwood’s publicly-available documents and evaluated the merits of a strategic combination to gain a better, and more up to date, understanding of Crestwood’s operations and financial position.

On May 15, 2023, Energy Transfer expressed to Intrepid its interest to engage in further dialogue with Crestwood and deepen its evaluation of a combination by signing a confidentiality agreement in order to review non-public or otherwise confidential information of Crestwood. Energy Transfer conveyed to Intrepid that any transaction would have to be accretive to Energy Transfer and with no premium to Crestwood’s trading price.

On May 25, 2023, Crestwood entered into a mutual confidentiality agreement with Energy Transfer and began to share certain confidential commercial and legal information. The confidentiality agreement included customary non-disclosure and nonuse provisions and a standstill provision that prohibited each party, for the duration of the standstill period, from offering to acquire or acquiring the other party, in each case, without the prior consent of the other party, and included a customary “fall-away” provision that renders the standstill inapplicable following such party’s entry into a definitive agreement relating to an acquisition of a majority of such party’s voting securities or assets.

On May 30, 2023, Crestwood began to populate a virtual data room (“VDR”) for due diligence purposes. Shortly thereafter, Crestwood opened access to its VDR to Energy Transfer.

On June 2, 2023, members of Crestwood management including Mr. Phillips and Mr. Robert Halpin, President of Crestwood, met with senior members of Energy Transfer’s management team including Messrs. Kelcy L. Warren, Thomas E. Long, Marshall S. McCrea, Dylan A. Bramhall and Christopher M. Hefty, for a Crestwood management presentation. In the meeting, Mr. Phillips provided an overview of Crestwood including the history of the company and current strategic priorities, including the rationale from Crestwood’s perspective of pursuing a business combination transaction. Mr. Halpin provided a summary of Crestwood’s key assets, a review of its current financial outlook, and the rationale for both Energy Transfer and Crestwood in pursuing the proposed transaction, including the opportunity for accelerated growth of Crestwood’s assets through integration into a larger, better capitalized, investment grade company with assets spanning all commodities across the full midstream value chain. During the presentation, Energy Transfer’s management team demonstrated interest furthering its evaluation of the proposed transaction, including the contract exposure and downstream connectivity opportunities.

On June 15, 2023, Energy Transfer informed Intrepid of its hiring of BofA Securities, Inc. (“BofA”) as their financial advisor for the proposed transaction.

On June 23, 2023, Crestwood management and the Crestwood board of directors held a special meeting to provide an update on Crestwood’s business and estimated second quarter results, discuss the current market environment and recent developments around industry consolidation and introduce a potential transaction with Energy Transfer. Mr. Phillips provided background information on Energy Transfer and summarized the discussions with Energy Transfer to date. Mr. Phillips noted that management had been working with Intrepid but had not yet engaged Intrepid to act as financial advisor. Mr. Halpin provided an overview of the potential structure and financial considerations of a transaction with Energy Transfer including that following initial discussions with Intrepid, Mr. Halpin’s understanding was that Energy Transfer was only interested in an at-the-market transaction. Lastly, Mr. Halpin provided a brief summary of the feedback received from Intrepid following its conversations with Party A and several other midstream companies regarding a potential business combination with Crestwood. At such meeting, the Crestwood board of directors approved the engagement of Intrepid as financial advisor to Crestwood in connection with a potential transaction with Energy Transfer.

On June 28, 2023, Crestwood entered into an engagement letter with Intrepid, which contained the terms of Intrepid’s engagement as financial advisor to Crestwood in connection with a potential transaction with Energy Transfer.

 

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On July 11, 2023, the Crestwood board of directors held a special meeting to receive an update on the potential transaction with Energy Transfer. Mr. Halpin provided an update on the due diligence efforts and the valuation discussions that had taken place between representatives of Crestwood and Energy Transfer. Mr. Halpin also summarized the key valuation considerations that had been discussed with Energy Transfer but noted that no formal indication of value had been provided at that time. Advisors from Intrepid were also present at this meeting and participated in the discussion regarding key valuation considerations and financial metrics. The board was also provided with materials from Vinson & Elkins L.L.P. (“Vinson & Elkins”), Crestwood’s legal counsel, regarding best practices, board duties and relevant provisions of Crestwood’s limited partnership agreement, and other considerations in evaluating a strategic transaction. The board asked questions of management about the assumptions underlying Crestwood’s standalone forecast and management answered such questions to the satisfaction of the board. The board also asked questions of management and Intrepid regarding the likelihood for any other potential acquirers to also have interest in a transaction with Crestwood. In response, Crestwood management and Intrepid provided a summary of potential counterparties for a potential business combination transaction along with a summary of strategic, commercial and financial merits and considerations to pursuing a transaction with each of those counterparties. Based on that review, management and the board concluded that continuing the pursuit of a transaction with Energy Transfer represented the best path forward for Crestwood’s unitholders subject to satisfactory agreement on relative value and key terms and conditions of the ultimate merger agreement.

On July 18, 2023, Crestwood received a non-binding proposal from Energy Transfer, offering to acquire all outstanding units of Crestwood through a unit-for-unit exchange. The letter outlined Energy Transfer’s interest in pursuing a transaction with Crestwood and the anticipated benefits it believed the transaction would provide for Crestwood’s unitholders, as holders of ET units following the proposed transaction, including: (i) access to a premier, diversified asset base and balanced commodity portfolio, (ii) strong pro forma balance sheet, (iii) healthy and growing distributions to Crestwood’s unitholders with a targeted growth rate of 3% to 5% per year, (iv) a tax-efficient transaction structure, and (v) access to Energy Transfer’s substantially higher trading liquidity relative to Crestwood. No exchange ratio or implied value was proposed, other than to state that the transaction would be structured as a no premium, unit-for-unit exchange and that legacy Crestwood unitholders would be expected to own approximately 7% of Energy Transfer.

On July 19, 2023, Crestwood contacted Evercore to discuss the engagement of Evercore to serve as a financial advisor to Crestwood in connection with evaluating a potential strategic transaction with Energy Transfer.

On July 19, 2023, Energy Transfer and Intrepid discussed the timing of second quarter earnings releases and potential timing for the proposed transaction. At that time, Intrepid notified Energy Transfer that Crestwood’s quarterly earning results were expected to be below Wall Street expectations, suggesting possible trading price volatility after the earnings announcement. Energy Transfer was unwilling to announce the proposed transaction concurrently with the earnings release and suggested a potential transaction timeline whereby negotiation of the exchange ratio would occur after the market settled from the earnings announcement. Intrepid conveyed this message to Crestwood management later that day.

On July 20, 2023, the Crestwood board of directors held a special meeting to discuss the proposal received from Energy Transfer on July 18, 2023. Representatives of Intrepid and Vinson & Elkins were also present at the meeting. At the meeting, certain members of Crestwood management and Intrepid discussed the strategic merits of the transaction. Members of Crestwood management and Intrepid explained that Energy Transfer was focused on a transaction that provided accretion to Energy Transfer on a distributable cash flow per unit basis. Crestwood management and the Crestwood board of directors discussed the importance of distribution neutrality for Crestwood unitholders who would also participate in the expected annual distribution growth at Energy Transfer compared to the flat distribution profile in Crestwood’s standalone forecast. Crestwood management, the Crestwood board of directors and Intrepid further discussed the illustrative pro forma financial impact and potential value uplift of the proposed transaction with Energy Transfer. Representatives of Intrepid also

 

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discussed with the Crestwood board of directors (i) its current perspectives on the midstream market and (ii) an overview of discussions with other midstream operators regarding the strategic landscape in midstream M&A and their potential interest in a strategic transaction with Crestwood.

On July 21, 2023, a member of the Crestwood executive management team had a meeting with a member of the management team of Party C, a large North American publicly-traded oil and gas infrastructure company. In that meeting, Crestwood and Party C discussed a recent transaction announced in the midstream sector and the rationale for broader industry consolidation. Party C agreed that more consolidation in the midstream sector was likely. Crestwood indicated that the Crestwood board of directors were supportive of pursuing opportunities to further integrate Crestwood’s assets further across the value chain including through a potential business combination transaction with a larger and more diversified company. Party C indicated that Crestwood fit the right size and scope but given lack of operational overlap, particularly in the Williston Basin, would not be a logical candidate for Party C to pursue. No further discussions took place with Party C.

Also on July 21, 2023, Crestwood provided Energy Transfer with an initial due diligence request list. Key diligence items requested included a financial forecast summary, a detailed review of the business segments, overview of growth projects, leverage calculations for each of the rating agencies, intended distribution policy and updates on ongoing litigation and any other material matters.

During the week of July 24, 2023, several due diligence meetings took place involving Crestwood, Energy Transfer and their respective financial and legal advisors. Energy Transfer also provided a financial forecast summary and select balance sheet data to Crestwood.

On July 25, 2023, Crestwood provided Evercore with information relating to the potential transaction with Energy Transfer for Evercore’s review.

On July 26, 2023, Crestwood management, together with advisors from Intrepid and Vinson & Elkins, and Energy Transfer management, together with representatives of its legal counsel, Kirkland & Ellis LLP (“Kirkland & Ellis”), held a call to discuss diligence matters relating to Energy Transfer.

On July 27, 2023, Energy Transfer’s legal counsel, Kirkland & Ellis, sent a draft of the merger agreement to Vinson & Elkins. The draft contemplated, among other things: (i) a “force the vote” provision, which would allow the Crestwood board of directors to change its recommendation in the event of, but not terminate the merger agreement to accept, a superior offer; (ii) (a) an antitrust covenant that expressly disclaimed any obligation for Energy Transfer to (1) divest assets, (2) create, terminate, modify or amend any agreements or (3) accept any restrictions on its freedom of action after the closing of the merger and (b) no restriction on Energy Transfer from taking actions that could delay or impede the ability to consummate the merger; (iii) a termination fee payable by Crestwood in certain circumstances to be equal to 5% of Crestwood’s equity value; (iv) an obligation to reimburse Energy Transfer for its transaction expenses up to 2% of Crestwood’s equity value if the Crestwood unitholders do not approve the transaction at the unitholder meeting, (v) an outside date of twelve months from the date of the merger agreement without any extensions and (vi) interim operating covenants restricting Crestwood’s ability to conduct its business outside of the ordinary course prior to Closing. Members of Crestwood management and representatives of Vinson & Elkins discussed and evaluated the terms of the draft merger agreement over the following days.

On July 28, 2023, Energy Transfer provided an updated financial forecast. Key changes were related to interest expense and cash flows associated with joint ventures, investments, and other reconciling items to distributable cash flow.

Between July 29, 2023 and August 1, 2023, Crestwood and its advisors discussed with Energy Transfer the preparation of a new financial forecast that incorporated Energy Transfer’s view on future commodity prices. On August 1, 2023, Crestwood provided this new forecast to Energy Transfer, which is Case Two as described in the “Crestwood and Energy Transfer Unaudited Prospective Financial Information.”

 

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On August 1, 2023, Crestwood issued a press release reporting its financial results for the three months ended June 30, 2023. That same day, Vinson & Elkins sent a revised draft of the merger agreement to Kirkland & Ellis. The draft contemplated, among other things: (i) removal of the “force the vote” provision such that Crestwood could terminate the merger agreement to accept a superior proposal; (ii) a covenant requiring Energy Transfer to defend the transaction through litigation and make divestitures up to an agreed-upon materiality threshold and refrain from taking any actions which could delay or impede the ability to consummate the merger; (iii) a termination fee payable by Crestwood in certain circumstances to be equal to 2.75% of Crestwood’s equity value and no obligation to reimburse Energy Transfer for its transaction expenses; (iv) revisions to the negative interim operating covenants to (a) allow additional flexibility for Crestwood to operate its business in the interim period and (b) include additional restrictions on actions by Energy Transfer that could affect unitholder value and (v) an outside date of twelve months from the date of the merger agreement, with a mutual right to extend for up to three months.

On August 2, 2023, the Crestwood board of directors held a special meeting to discuss the offer received from Energy Transfer on July 18, 2023 and the draft merger agreement. Certain members of Crestwood management and representatives of Vinson & Elkins, Intrepid and Evercore were also present at the meeting. Representatives of Vinson & Elkins presented on the considerations the Crestwood board of directors should be mindful of in evaluating an acquisition transaction, including best practices, board duties and relevant provisions of Crestwood’s limited partnership agreement. Certain members of Crestwood management and representatives of Intrepid summarized Crestwood’s due diligence review of Energy Transfer, including the July 26, 2023 due diligence call and a summary of the financial forecast provided by Energy Transfer management on July 28, 2023. Certain members of Crestwood management and representatives of Intrepid and Evercore discussed financial considerations, including historical exchange ratios, accretion/dilution relative to distributable cash flow per unit and distributions per unit, the range of exchange ratios necessary to accomplish each party’s objectives and various other financial analyses. Thereafter, the Crestwood board of directors requested Crestwood management and Intrepid to provide additional information regarding Energy Transfer’s securities and other information necessary for the Crestwood board of directors to evaluate the proposed acquisition transaction. Certain members of Crestwood management and Vinson & Elkins discussed key issues in the draft merger agreement.

On August 3, 2023, Intrepid provided materials to the Crestwood board of directors, which detailed additional information regarding Energy Transfer and its securities. The presentation materials were made available in response to the Crestwood board of directors’ request during the board meeting held on August 2, 2023.

On August 4, 2023, Crestwood entered into an engagement letter with Evercore, which contained the terms of Evercore’s engagement as financial advisor to Crestwood in connection with the potential transaction with Energy Transfer.

On August 7, 2023, Crestwood received a revised non-binding proposal from Energy Transfer. In this letter, Energy Transfer communicated a proposed exchange ratio of 2.05x and a seven-day execution timeline. That same day, Kirkland & Ellis sent a revised draft of the merger agreement to Vinson & Elkins. This draft reflected, among other things: (i) reinsertion of the “force the vote” provision; (ii) reinsertion of an antitrust covenant that expressly disclaimed any obligation for Energy Transfer to (1) divest assets, (2) create, terminate, modify or amend any agreements or (3) accept any restrictions on its freedom of action after the closing of the merger; (iii) elimination of any restriction on Energy Transfer from taking actions that could delay or impede the ability to consummate the merger; (iv) reinsertion of the obligation to reimburse Energy Transfer for its transaction expenses if the Crestwood unitholders do not approve the transaction at the unitholder meeting (but reduced the cap on expenses to up to 1% of Crestwood’s equity value); (v) a rejection of a number of the proposed changes to the interim operating covenants; and (vi) an increased termination fee payable by Crestwood in certain circumstances of 4.25% of Crestwood’s equity value.

On August 8, 2023, at a special meeting, the Crestwood board of directors, together with representatives from Crestwood’s executive management team, Vinson & Elkins, Intrepid and Evercore, evaluated Energy

 

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Transfer’s revised offer letter and discussed the revised draft merger agreement received on August 7, 2023, including the range of exchange ratios that would provide for an accretive transaction for Energy Transfer while being at least neutral to the distribution payable to Crestwood unitholders at closing and thereafter participate in the expected annual distribution growth at Energy Transfer. Thereafter, the Crestwood board of directors determined that Crestwood should propose an exchange ratio of 2.11x and instructed Crestwood management and Intrepid to convey such proposal to Energy Transfer, which occurred later that day in a call from Intrepid to Energy Transfer.

On August 9, 2023, a meeting was held among Crestwood, Energy Transfer, Vinson & Elkins and Kirkland & Ellis to discuss key issues in the draft merger agreement, including deal protections, interim operating covenants, obligations with respect to antitrust and other regulatory approvals and termination rights. On that same day, representatives of Energy Transfer called Intrepid to communicate a revised offer. In response to Crestwood’s counter, Energy Transfer proposed to increase the exchange ratio to 2.07x. Later that day, Intrepid delivered the new proposal to Crestwood management.

Later on August 9, 2023, Vinson & Elkins sent a revised draft of the merger agreement to Kirkland & Ellis, which reflected, among other things: (i) removal of the “force the vote” provision such that Crestwood could terminate the merger agreement to accept a superior proposal; (ii) addition of a termination right for Crestwood in the event that Energy Transfer, among other things, enters into an agreement that is reasonably expected to adversely affect the closing of the merger and a corresponding reverse termination fee; (iii) reinsertion of a covenant requiring Energy Transfer to defend through litigation on the merits any claim asserted that would prevent the closing of the merger from occurring no later than the End Date; (iv) removal of the obligation to reimburse Energy Transfer for its transaction expenses; (v) revisions to the negative interim operating covenants of each party; and (vi) a termination fee to be equal to 3.00% of Crestwood’s equity value payable by Crestwood in certain circumstances.

On August 10, 2023, the Crestwood board of directors held a special session at its regularly scheduled board meeting to discuss the revised draft merger agreement and the status of the proposed acquisition transaction with Energy Transfer. Certain members of Crestwood management and advisors from Intrepid, Evercore and Vinson & Elkins were also in attendance at the meeting. The Crestwood board received various presentations from representatives of Crestwood management, Intrepid, Evercore and Vinson & Elkins providing updates to the proposed terms of the proposed acquisition transaction with Energy Transfer, the benefits of, and rationale for, the proposed acquisition transaction with Energy Transfer, management’s diligence that had been completed with respect to Energy Transfer, management’s views of potential alternative transactions and the limited actionability and considerations for such transactions with other counterparties including Party A, Party C and other large midstream companies, the outlook for Crestwood if it determined to pursue its standalone plan as well as perspectives on the relative valuations of Crestwood and Energy Transfer, including Evercore’s preliminary financial analysis of the proposed transaction. Evercore’s preliminary financial analysis included, among other things, (i) a situation analysis of Crestwood and Energy Transfer, (ii) an overview of the Crestwood unaudited prospective financial information and the Energy Transfer unaudited prospective financial information, (iii) a preliminary valuation analysis of the Crestwood common units and the Energy Transfer common units, (iv) a preliminary analysis of the proposed exchange ratio and (v) a pro forma analysis of the financial impact to Energy Transfer of an acquisition of Crestwood. The parties additionally discussed open issues in merger negotiations and related items. Following discussion, the Crestwood board of directors determined that Crestwood should propose an exchange ratio of 2.08x and instructed Crestwood management and Intrepid to convey such proposal to Energy Transfer.

On August 11, 2023, Intrepid discussed with Energy Transfer the proposed exchange ratio of 2.08x and conveyed the importance of distribution neutrality to the Crestwood board of directors. Energy Transfer declined to increase the exchange ratio consideration from 2.07x but suggested a special one-time distribution to achieve distribution neutrality of $0.003/unit in the event the proposed transaction closed prior to the ex-dividend date for Energy Transfer’s fourth quarter 2023 distribution. The $0.003/unit special one-time distribution was derived

 

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from the difference for Crestwood’s projected fourth quarter 2023 distribution of $0.655/unit and the implied Crestwood distribution from a 2.07x exchange ratio and Energy Transfer’s projected fourth quarter 2023 distribution of $0.315/unit.

On August 11, 2023, Kirkland & Ellis hosted a management due diligence call with members of Crestwood and Energy Transfer management. Representatives of Vinson & Elkins were also present on the call. The parties discussed, among other things, due diligence matters related to human resources and personnel, environmental, health and safety, energy regulatory, general corporate and litigation.

Later on August 11, 2023, Kirkland & Ellis sent a revised draft of the merger agreement to Vinson & Elkins. This draft reflected, among other things: (i) acceptance of the ability of Crestwood to terminate the merger agreement to accept a superior proposal; (ii) removal of the right for Crestwood to terminate in the event that Energy Transfer enters into an agreement that is reasonably expected to adversely affect the closing of the merger and the related reverse termination fee; (iii) acceptance of a covenant restricting Energy Transfer’s ability to make any acquisitions that would prevent or materially impede the closing of the merger, but only through December 31, 2023; (iv) reinsertion of the obligation to reimburse Energy Transfer for its transaction expenses up to 1% of Crestwood’s equity value if the Crestwood unitholders do not approve the transaction at the special meeting and (v) a termination fee payable by Crestwood in certain circumstances to be equal to 3.5% of Crestwood’s equity value. The draft also permitted Crestwood to make a one-time special distribution of $0.003 per common unit in the event the transaction closed prior to the ex-dividend date for Energy Transfer’s fourth quarter 2023 distribution.

On August 12, 2023, Vinson & Elkins sent a revised draft of the merger agreement to Kirkland & Ellis. This draft reflected, among other things: (i) further revisions to the negative interim operating covenants of Crestwood and Energy Transfer (ii) acceptance of the proposed 3.5% termination fee, conditioned upon removal of the obligation to reimburse Energy Transfer for its transaction expenses if the Crestwood unitholders do not approve the transaction at the special meeting; (iii) a covenant restricting Energy Transfer’s ability to make any acquisitions that would prevent or materially impede the closing of the merger through six months from the date of signing; and (iv) shortening the end date to six months from the date of signing, coupled with the right of Crestwood to extend the end date upon written notice to Energy Transfer.

On August 14, 2023, Kirkland & Ellis sent a revised draft of the merger agreement to Vinson & Elkins. This draft reflected, among other things: (i) further revisions to the negative interim operating covenants of Crestwood and Energy Transfer (ii) shortening the applicability of the covenant restricting Energy Transfer’s ability to make any acquisitions that would prevent or materially impede the closing of the merger through December 31, 2023 and (iii) provided for an initial end date of February 15, 2024 but permitting either party to extend the end date to November 15, 2024 upon written notice to the other party.

On August 15, 2023, Vinson & Elkins sent a revised draft of the merger agreement to Kirkland & Ellis. This draft reflected, among other things, (i) further revisions to the negative interim operating covenants of Crestwood and Energy Transfer and (ii) the addition of an initial end date of December 31, 2023 with a mutual right to extend the End Date up to August 15, 2024, provided that Energy Transfer may only exercise such right if it agrees to similarly extend the applicability of the covenant restricting its ability to make any acquisitions that would prevent or materially impede the closing of the merger (but no such extension by Crestwood will have any effect upon the duration of the covenant restricting Energy Transfer’s ability to make any acquisitions that would prevent or materially impede the closing of the merger).

On August 15, 2023, the Crestwood board of directors held a special meeting in the afternoon to discuss the proposed transaction with Energy Transfer, including the near-final terms of the merger agreement. Certain members of Crestwood management and advisors from Intrepid, Evercore and Vinson & Elkins were also in attendance at the meeting. At this meeting, representatives of Crestwood management and Vinson & Elkins made a presentation to the Crestwood board of directors with respect to various matters, including, without limitation, an overview of the key terms of the merger agreement and the few remaining open items in the merger

 

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agreement. Evercore then presented to the Crestwood board of directors regarding, among other things, an update of its preliminary financial analysis of the proposed transaction based on the current deal terms and responded to questions from the Crestwood board of directors. Crestwood management then noted to the board that it would reconvene the board to consider whether to approve the transaction once final merger agreement terms had been confirmed with Energy Transfer.

Also on August 15, 2023, the ET board of directors held a special meeting to approve the merger agreement and the transactions contemplated thereby, including the merger. After discussion, the merger, the ET board of directors unanimously approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the issuance of ET units.

After receiving the draft and determining that all material merger agreement terms were agreed, the Crestwood board of directors reconvened to hold a special meeting in the evening to consider whether to approve the proposed transaction with Energy Transfer. At this meeting, Evercore presented its final financial analysis of the proposed transaction and, at the request of the Crestwood board of directors, rendered its oral opinion to the Crestwood board of directors that, as of August 15, 2023, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, the exchange ratio is fair, from a financial point of view, to the holders of Crestwood common units. Evercore subsequently confirmed its oral opinion in writing. After discussion, and taking into full consideration the current alternative strategic paths forward for Crestwood, the Crestwood board of directors unanimously (i) determined that the merger agreement and transactions contemplated thereby, including the merger, were in the best interests of Crestwood and its unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, (iv) resolved to recommend adoption of the merger agreement by the Crestwood unitholders and (v) directed that the merger agreement be submitted to the Crestwood unitholders for adoption.

Throughout the day on August 15, 2023 and the morning of August 16, 2023, representatives of each of Kirkland & Ellis and Vinson & Elkins finalized the merger agreement and disclosure schedules, following which Crestwood and Energy Transfer executed and delivered the merger agreement.

Prior to the opening of U.S. stock markets on August 16, 2023, Crestwood and Energy Transfer issued a joint press release announcing the merger agreement.

Recommendation of the Crestwood Board of Directors and Reasons for the Merger

On August 15, 2023, the Crestwood board of directors unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are in the best interests of Crestwood and its unitholders, (ii) approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, (iii) approved the execution, delivery and performance of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, (iv) resolved to recommend adoption of the merger agreement by the Crestwood unitholders and (v) directed that the merger agreement be submitted to the Crestwood unitholders for adoption. The Crestwood board of directors unanimously recommends that Crestwood unitholders vote “FOR” the merger proposal and “FOR” the advisory compensation proposal and “FOR” the adjournment proposal.

In the course of reaching its determinations and recommendations, the Crestwood board of directors consulted with Crestwood’s senior management and its outside legal and financial advisors and considered several potentially positive factors that weighed in favor of the merger, including the following (not necessarily presented in order of relative importance):

 

   

The Merger is Superior to Crestwood on a Standalone Basis.

 

   

Asset Scale. While Crestwood owns high quality gathering and processing assets, a substantial portion of its revenue and earnings before interest, taxes, depreciation and amortization

 

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(“EBITDA”) is concentrated in the oil and gas producing region located in eastern Montana, western North Dakota, South Dakota, southern Saskatchewan and southwestern Manitoba (the “Williston Basin”). In contrast, Energy Transfer is one of the largest and most diversified midstream energy companies in North America, with approximately 125,000 miles of pipeline and associated energy infrastructure, with assets in every major U.S. supply basin linked to major demand markets in the United States, including export markets. Energy Transfer is a fully integrated franchise with gathering, processing, fractionation, transportation, storage, terminalling and export assets and transports approximately 25% of U.S. natural gas, more than 25% of U.S. NGLs and more than 35% of U.S. crude oil;

 

   

Financial Scale. Energy Transfer has an annual adjusted EBITDA of approximately $13 billion, has a highly diversified business model comprised of five core segments, of which no one segment contributes more than 30% to adjusted EBITDA, has a market capitalization of approximately $42 billion and an enterprise value of approximately $101 billion;

 

   

Distribution Yield and Growth. The Crestwood board of directors believes the merger will be distribution neutral to Crestwood unitholders immediately upon closing. The Crestwood board of directors further determined that Crestwood’s distributions are likely to remain flat in the near-to-medium term on a stand-alone basis while Crestwood focuses on further deleveraging, while Energy Transfer has publicly announced it is targeting annual distribution growth of 3-5%, which Crestwood unitholders would participate in. The Crestwood board of directors further determined that Energy Transfer offers an attractive yield entry point at approximately 9.3%;

 

   

Potential Value Uplift. The Crestwood board of directors observed that Energy Transfer’s enterprise value to EBITDA trading multiple is meaningfully lower than both Crestwood’s and its peers’ trading multiples and believed that any re-rating of Energy Transfer’s valuation to a multiple more in-line with the peer average, would result in meaningful upside for Crestwood unitholders;

 

   

Cash Flow Stability. Crestwood’s operations are subject to commodity risk, volumetric risk and concentration of customer risk. In contrast, Energy Transfer has a diversified portfolio of midstream assets with diversification by product, service and customers and is party to significant take-or-pay contracts and less overall relative exposure to those risks;

 

   

Balance Sheet Strength. Energy Transfer has an investment grade balance sheet and there is significant value expected to accrue from this in connection with the refinancing of Crestwood’s debt and preferred equity securities over the next ten years;

 

   

Free Cash Flow. Crestwood’s future free cash flow is expected to be allocated to debt paydown until its long-term leverage targets are met, making it difficult for Crestwood to grow its distributions to Crestwood common unitholders. In contrast, Energy Transfer has stated its intention to allocate free cash flow to distribution growth and growth capital investment;

 

   

Growth Visibility. The Crestwood board of directors observed that Crestwood’s growth was highly correlated to a concentrated set of producers and their development plans, while Energy Transfer is levered to strong fundamentals for export growth and upstream development; and

 

   

Meaningful Uplift in Trading Liquidity. Energy Transfer’s average daily trading volume of approximately 10,500,000 ET common units is significantly higher than Crestwood’s average daily trading volume of less than 500,000 Crestwood common units.

 

   

Value and Composition of the Consideration.

 

   

The fact that the common unit merger consideration has an implied value per Crestwood common unit of $26.00, based on the closing price of ET common units as of August 15, 2023 (the last trading day prior to the approval of the merger agreement), which the Crestwood board of

 

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directors regarded as an attractive valuation relative to the long-term value of Crestwood as a standalone publicly traded partnership and peer comparisons;

 

   

The fact that the benefits that Crestwood was able to obtain, as a result of negotiations, including an increase in the exchange ratio from the time of initial discussions to the final implied exchange ratio of 2.07 ET common units per Crestwood common unit, and Crestwood’s board of directors’ belief that this was the highest exchange ratio that Energy Transfer would be willing to offer;

 

   

The fact that the Crestwood preferred unitholders would be entitled to select their desired form of consideration, in accordance with the terms of the Crestwood partnership agreement;

 

   

The fact that the unit-for-unit merger allows Crestwood unitholders to participate in the value and opportunities of Energy Transfer after the merger, including distributions and expected future growth;

 

   

The fact that the exchange ratio provides for a fixed number of ET common units and therefore the implied value of the consideration payable to Crestwood common unitholders will increase in the event that the market price of ET common units increases prior to the closing of the merger;

 

   

The fact that Energy Transfer has demonstrated durable, long-term access to the capital markets to fund its operations;

 

   

The belief of the Crestwood board of directors that it is unlikely that any other party or parties would be prepared to pay a higher price to acquire Crestwood at this time; and

 

   

The expectation that Crestwood unitholders generally should not recognize any gain or loss for U.S. federal income tax purposes as a result of the merger.

 

   

Synergies and Strategic Considerations

 

   

The belief that the combination of Energy Transfer’s significant infrastructure with Crestwood’s complementary assets will allow the combined company to pursue additional commercial opportunities and achieve cost savings while enhancing the combined company’s ability to serve customers;

 

   

The belief of the Crestwood board of directors that Energy Transfer’s strategy for integration of the Crestwood assets will maximize return on its asset base;

 

   

The belief that the ET board of directors’ familiarity with and understanding of Crestwood’s business, results of operations, financial and market position, and its expectations concerning Crestwood’s future prospects will continue to drive value with respect to Crestwood’s assets;

 

   

The belief that from a financial and operational perspective, the merger will improve the cost of capital and expand the scale, geographic diversity, asset diversity and commodity diversity of the combined company as compared to Crestwood as a standalone company;

 

   

The fact that the transaction will position the combined company in all major U.S. basins, including the Permian Basin and Williston Basin, where both Energy Transfer and Crestwood have operations today;

 

   

The current and prospective business climate in the industry in which Crestwood and Energy Transfer operate, including the position of current and likely competitors of Crestwood and Energy Transfer; and

 

   

The caliber of Energy Transfer’s executive management team and board of directors, which are expected to continue in their roles following the consummation of the transactions.

 

   

Opinion of Financial Advisor

 

   

The financial analyses prepared by Evercore and discussed with the Crestwood board of directors and the oral opinion of Evercore rendered to the Crestwood board of directors on August 15, 2023,

 

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which was subsequently confirmed in writing, to the effect that, as of such date, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, the exchange ratio is fair, from a financial point of view, to the Crestwood common unitholders.

 

   

Due Diligence

 

   

The fact that the Crestwood board of directors considered the results of the due diligence reviews of Energy Transfer and its businesses conducted by Crestwood management and its financial advisors and outside legal counsel;

 

   

The absence of other strategic alternatives available to Crestwood that would provide comparable or superior value and terms, based in part on the Crestwood board of directors’ recognition of the risks and uncertainties related to midstream corporate and asset transactions;

 

   

The historical and current market prices of Crestwood common units;

 

   

The risks and uncertainties related to the ongoing disruption to oil demand, due to unpredictable geopolitical dynamics, including actions of foreign oil producers, and potential consumption of hydrocarbons trending lower long-term, which risks are relatively greater were Crestwood to continue to operate as a standalone company with relatively smaller market capitalization than the combined company;

 

   

The belief that investors tend to favor midstream investments exhibiting scale, asset footprint diversity and integration, which will be achieved through a combination with Energy Transfer; and

 

   

The fact that Energy Transfer’s size, scale and asset diversity will offer improved ability to withstand commodity supply and demand and price volatility.

 

   

Likelihood of Completion of the Transaction

 

   

The belief that the transaction will be consummated due to the limited number and customary nature of the closing conditions;

 

   

The belief that the parties’ businesses and assets are complementary, and therefore the belief that the likelihood of receiving clearance under the HSR Act and other regulatory reviews is high;

 

   

The fact that the merger and the issuance of ET common units in connection with the merger are not subject to a vote of Energy Transfer’s equity owners;

 

   

The lack of a financing condition to closing and the overall scope of the conditions to closing; and

 

   

The circumstances under which the merger agreement can be terminated and the impact of such termination (see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 112 of this proxy statement/prospectus).

 

   

Favorable Terms of the Merger Agreement

 

   

The belief that, in coordination with Crestwood’s legal advisors, the terms of the merger agreement, taken as a whole, including the parties’ representations, warranties, covenants and conditions to closing, and the circumstances under which the merger agreement may be terminated, are reasonable;

 

   

The fact that, in order to obtain any required regulatory approvals, subject to certain exceptions and limitations, Energy Transfer is required to litigate against any decree, order or judgment that would prevent the merger from occurring;

 

   

The fact that Crestwood has the ability, under certain circumstances, to provide information to and to engage in discussions or negotiations with a third party that makes an unsolicited acquisition proposal;

 

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The fact that the Crestwood board of directors has the ability to terminate the merger agreement under certain circumstances, including to enter into an agreement providing for a superior proposal, subject to certain conditions (including payment of a reasonable and customary breakup fee to Energy Transfer and certain rights of Energy Transfer, giving it the opportunity to match such superior proposal); and

 

   

The fact that the Crestwood board of directors, after discussing the termination fees with its advisors, believed that such fees were consistent with market practice.

The Crestwood board of directors also considered and balanced against the potentially positive factors with a number of uncertainties, risks and other countervailing factors in its deliberations concerning the merger and the merger agreement, including the following (not necessarily presented in order of relative importance):

 

   

The fact that the Crestwood board of directors did not conduct a public auction process or other formal solicitation of interest from third parties for the acquisition of Crestwood common units;

 

   

The fact that the exchange ratio provides for a fixed number of ET common units and, as such, Crestwood unitholders cannot be certain, at the time of the special meeting, of the market value of the common unit merger consideration and preferred consideration they will receive, and the possibility that Crestwood common unitholders could be adversely affected by a decrease in the market price of ET common units before the closing of the merger;

 

   

The fact that the market price of Crestwood common units could be affected by many factors, including: (i) if the merger agreement is terminated, the reason or reasons for such termination and whether such termination resulted from factors adversely affecting Crestwood; (ii) the possibility that, as a result of the termination of the merger agreement, possible acquirers may consider Crestwood to be an unattractive acquisition candidate; and (iii) the possible sale of Crestwood common units by short-term investors following an announcement that the merger agreement was terminated;

 

   

The risks and contingencies relating to the announcement and pendency of the merger, including the potential for diversion of management and employee attention and the potential effect of the merger on the businesses of both companies and the restrictions on the conduct of Crestwood’s business during the period between the execution of the merger agreement and the completion of the transactions contemplated thereby;

 

   

The potential challenges and difficulties in integrating the operations of Crestwood into Energy Transfer and the risk that the anticipated cost savings and operational and other synergies between the two companies, or other anticipated benefits of the merger, might not be realized, may only be achieved over time or might take longer to realize than expected;

 

   

The fact that Crestwood would be required to pay Energy Transfer a breakup fee of $96 million if, among other circumstances, the Crestwood board of directors were to terminate the merger agreement in order for Crestwood to enter into a superior proposal, should one be made. The Crestwood board of directors believed that the breakup fee amount is consistent with comparable transactions and would not be preclusive of other offers. In addition, if the merger agreement is terminated, Crestwood will generally be required to pay its own expenses associated with the transaction;

 

   

The fact that the merger may not be completed in a timely manner, or at all, and a failure to complete the merger could result in significant costs and disruption to Crestwood’s normal business and negatively affect the trading price of Crestwood common units;

 

   

The possibility that litigation may be commenced in connection with the merger and such litigation may increase costs and result in a diversion of management focus;

 

   

The fact that Crestwood unitholders are not entitled to dissenters’ or appraisal rights under the merger agreement, Crestwood’s Limited Partnership Agreement or Delaware law;

 

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The fact that there are restrictions in the merger agreement on Crestwood’s ability to solicit competing bids to acquire it and to entertain other acquisition proposals unless certain conditions are satisfied;

 

   

The fact that the restrictions on Crestwood’s conduct of business prior to completion of the transaction could delay or prevent Crestwood from undertaking business opportunities that may arise or taking other actions with respect to its operations during the pendency of the transaction;

 

   

The fact that Crestwood common unitholders will own approximately 6.5% of the outstanding ET common units after the merger (which number would be 6.9% assuming all Crestwood preferred unitholders elect to convert their Crestwood preferred units into Crestwood common units); and

 

   

The Crestwood board of directors considered risks of the type and nature described under the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 38 and 28, respectively.

After taking into account the factors set forth above, as well as others, the Crestwood board of directors concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the transaction were outweighed by the potential benefits of the transaction to Crestwood unitholders.

The foregoing discussion of factors considered by Crestwood is not intended to be exhaustive but summarizes the material factors considered by the Crestwood board of directors. In light of the variety of factors considered in connection with their evaluation of the merger agreement and the merger, Crestwood did not find it practicable to, and did not, quantify, rank or otherwise assign relative weights to the specific factors considered in reaching their determinations and recommendations. Moreover, each member of the Crestwood board of directors applied his or her own personal business judgment to the process and may have given different weight to different factors. The Crestwood board of directors based its recommendation on the totality of the information presented, including thorough discussions with, and questioning of, Crestwood’s senior management and the Crestwood board of directors’ outside legal and financial advisors.

In considering the recommendation of the Crestwood board of directors to approve the merger agreement, Crestwood unitholders should be aware that the executive officers and directors of Crestwood have certain interests in the transaction that may be different from, or in addition to, the interests of Crestwood unitholders generally. See the section entitled “—Interests of Crestwood’s Directors and Executive Officers in the Merger” beginning on page 78.

It should be noted that this explanation of the reasoning of the Crestwood board of directors and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 38.

Opinion of Crestwood’s Financial Advisor

The Crestwood board of directors retained Evercore to act as financial advisor to the Crestwood board of directors in connection with evaluating whether the exchange ratio was fair, from a financial point of view, to the Crestwood common unitholders. The Crestwood board of directors selected Evercore—an internationally recognized investment banking firm that is regularly engaged in the valuation of businesses in connection with mergers and acquisitions, leveraged buyouts, competitive biddings, private placements and valuations for corporate and other purposes—to act as its financial advisor based on, among other things, its qualifications, experience and reputation, as well as familiarity with the business engaged in by Crestwood. On August 15, 2023, at a meeting of the Crestwood board of directors and at the request of the Crestwood board of directors, Evercore rendered its oral opinion to the Crestwood board of directors that, as of August 15, 2023, and based upon and subject to the factors, procedures, assumptions, qualifications and limitations set forth in its opinion, the exchange ratio is fair, from a financial point of view, to the Crestwood common unitholders. Evercore subsequently confirmed its oral opinion in a written opinion dated August 15, 2023.

 

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The full text of the written opinion of Evercore, dated as of August 15, 2023, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached hereto as Annex B to this proxy statement/prospectus. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Crestwood board of directors in connection with its evaluation of the fairness of the exchange ratio, from a financial point of view, to the Crestwood common unitholders, and did not address any other aspects or implications of the merger. Evercore’s opinion should not be construed as creating any fiduciary duty on Evercore’s part to any party and such opinion was not intended to be, and does not constitute, a recommendation to the Crestwood board of directors or to any other persons in respect of the merger, including as to how Crestwood unitholders should act or vote in respect of the merger. The summary of the Evercore opinion set forth herein is qualified in its entirety by reference to the full text of the opinion included as Annex B.

In connection with rendering its opinion and performing its related financial analysis, Evercore, among other things:

 

   

reviewed certain publicly available business and financial information relating to Crestwood and Energy Transfer that Evercore deemed to be relevant, including the Annual Report on Form 10-K for the year ended December 31, 2022, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023 and certain Current Reports on Form 8-K, in each case as filed with or furnished to the SEC by Crestwood and Energy Transfer;

 

   

reviewed certain non-public historical and projected financial and operating data and assumptions relating to Crestwood and Energy Transfer prepared and furnished to Evercore by management of Crestwood and Energy Transfer;

 

   

reviewed publicly available research analyst estimates for Crestwood’s and Energy Transfer’s future financial performance;

 

   

reviewed the reported prices and the historical trading activity of the Crestwood common units and ET common units;

 

   

discussed with management of Crestwood their assessment of the past and current operations of Crestwood, the current financial condition of Crestwood, the prospects of Crestwood and the historical and projected financial and operating data and assumptions relating to Crestwood (including management’s views of the risks and uncertainties of achieving such projections);

 

   

performed discounted cash flow analyses on Crestwood and Energy Transfer based on forecasts and other data provided by management of Crestwood and Energy Transfer;

 

   

performed discounted distributions analyses on Crestwood and Energy Transfer based on forecasts and other data provided by management of Crestwood and Energy Transfer;

 

   

compared the financial performance of Crestwood and Energy Transfer utilizing forecasts and other data provided by management of Crestwood and Energy Transfer with the trading performance (including equity market trading multiples) of other publicly traded partnerships and companies that we deemed relevant;

 

   

reviewed the draft merger agreement dated August 15, 2023 (the “draft merger agreement”); and

 

   

performed such other analyses and examinations, held such other discussions, reviewed such other information and considered such other factors and information that we deemed appropriate.

For purposes of its analysis and opinion, Evercore assumed and relied upon, without undertaking any independent verification of, the accuracy and completeness of all of the information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, and Evercore

 

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assumed no liability therefor. With respect to the projected financial and operating data referred to above, Evercore assumed that such data had been reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of management of Crestwood and Energy Transfer as to the future financial performance of Crestwood and Energy Transfer under the assumptions reflected therein. Evercore did not express a view as to any projected financial or operating data or any judgments, estimates or assumptions on which they are based.

For purposes of its analysis and opinion, Evercore assumed, in all respects material to its analysis, that the final executed merger agreement would not differ from the draft merger agreement reviewed by Evercore, that the representations and warranties of each party contained in the merger agreement are true and correct, that each party will perform all of the covenants and agreements required to be performed by it under the merger agreement and that all conditions to the consummation of the merger will be satisfied without material waiver or modification thereof. Evercore assumed the merger will be consummated as contemplated by the merger agreement. Evercore assumed that any modification to the structure of the merger will not vary in any respect material to its analysis. Evercore further assumed, in all respects material to its analysis, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the merger will be obtained without any material delay, limitation, restriction or condition that would have an adverse effect on Crestwood or Energy Transfer or the consummation of the merger or materially reduce the contemplated benefits of the merger to the holders of ET common units. Evercore assumed that the final versions of all documents reviewed by Evercore in draft form would conform in all material respects to the drafts reviewed by Evercore.

Evercore did not make nor assume any responsibility for making any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or other off balance sheet assets and liabilities) of Crestwood or Energy Transfer, nor was Evercore furnished with any such valuations or appraisals, nor did Evercore evaluate the solvency or fair value of Crestwood or Energy Transfer under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to Evercore as of the date of its opinion and financial, economic, monetary, market, regulatory and other conditions and circumstances as they existed and as could be evaluated on the date of its opinion. It is understood that subsequent developments may affect Evercore’s opinion and that Evercore does not have any obligation to update, revise or reaffirm its opinion.

Evercore was not asked to pass upon, and did not express an opinion with respect to, any matter other than the fairness to the Crestwood common unitholders, from a financial point of view, of the exchange ratio. Evercore did not express any view on, and its opinion did not address, the fairness of the merger to, or any consideration received in connection therewith by, the holders of any other securities, creditors or other constituencies of Crestwood or any other party to the merger agreement or any affiliates thereof, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of Crestwood or any other party to the merger agreement or any affiliates thereof, or any class of such persons, whether relative to the exchange ratio or otherwise. Evercore was not asked to, nor did it express any view on, and its opinion did not address, any other term or aspect of the merger agreement or the merger, including, without limitation, the structure or form of the merger, or any term or aspect of any other agreement or instrument contemplated by the merger agreement or entered into or amended in connection with the merger agreement. Evercore’s opinion did not address the relative merits of the merger as compared to other business or financial strategies that might be available to Crestwood, nor did it address the underlying business decision of Crestwood to engage in the merger. Evercore’s opinion did not constitute a recommendation to the Crestwood board of directors or to any other persons in respect of the merger. Evercore expressed no opinion as to the price at which the Crestwood common units or ET common units will trade at any time. Evercore is not a legal, regulatory, accounting or tax expert and assumed the accuracy and completeness of assessments by Crestwood and its advisors with respect to legal, regulatory, accounting and tax matters.

Set forth below is a summary of the material financial analyses performed by Evercore and reviewed with the Crestwood board of directors on August 15, 2023 in connection with rendering Evercore’s opinion to the Crestwood board of directors. Each analysis was provided to the Crestwood board of directors. The following

 

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summary, however, does not purport to be a complete description of the analyses performed by Evercore. In connection with arriving at its opinion, Evercore considered all of its analyses as a whole, and the order of the analyses described and the results of these analyses do not represent any relative importance or particular weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on August 14, 2023, and is not necessarily indicative of current market conditions.

Throughout the “Analysis of Crestwood” and the “Analysis of Energy Transfer” sections below, the term “EBITDA,” as used in connection with Evercore’s various financial analyses, means the relevant company’s estimated earnings before interest, taxes, depreciation and amortization, and refers to adjusted EBITDA, as used by Crestwood’s management and Energy Transfer’s management, as applicable, and described below under “—Crestwood and Energy Transfer Unaudited Prospective Financial Information.”

The following summary of financial analyses includes information presented in tabular format. These tables must be read together with the text of each summary in order to fully understand the financial analyses performed by Evercore. The tables alone do not constitute a complete description of the financial analyses performed by Evercore. Considering the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Evercore’s financial analyses.

Analysis of Crestwood

Assumptions with Respect to Crestwood

Evercore performed a series of financial analyses to derive indicative valuation ranges for the Crestwood common units. Financial data for Crestwood utilized in the financial analyses described below were based upon, among other things, the unaudited, non-public financial projections for Crestwood prepared and furnished by management of Crestwood (the “CEQP Financial Projections”) and the CEQP Financial Projections as adjusted by Crestwood’s management based on Energy Transfer management’s outlook for future commodity price levels as of July 25, 2023 (the “CEQP Financial Projections: Case Two”). A summary of the CEQP Financial Projections and CEQP Financial Projections: Case Two is available in “—Crestwood and Energy Transfer Unaudited Prospective Financial Information” below. The CEQP Financial Projections and CEQP Financial Projections: Case Two were not adjusted by Evercore.

Discounted Cash Flow Analysis

Evercore performed a discounted cash flow analysis of Crestwood by valuing the cash flows to be received by Crestwood based on the CEQP Financial Projections during a four-year period and based on the CEQP Financial Projections: Case Two during a three-year period. Evercore calculated the per unit value range for the Crestwood common units by utilizing a range of discount rates based on Crestwood’s Weighted Average Cost of Capital (“WACC”), as estimated by Evercore based on a theoretical Capital Asset Pricing Model (“CAPM”) and terminal values based on a range of estimated EBITDA multiples and perpetuity growth rates.

For Crestwood’s discounted cash flow analysis, Evercore assumed a range of discount rates of 7.0% to 8.5% based on Crestwood’s WACC, a range of EBITDA multiples of 8.5x to 10.0x applied to Crestwood’s terminal period EBITDA and a range of perpetuity growth rates of -0.5% to 0.5% applied to Crestwood’s terminal period cash flows based on the CEQP Financial Projections and CEQP Financial Projections: Case Two, as applicable, to derive a range of enterprise values. Evercore adjusted such enterprise values for projected debt, preferred equity and cash as of December 31, 2023, and divided the resulting equity values by the projected number of fully-diluted Crestwood common units as of December 31, 2023. The discounted cash flow analysis utilizing the EBITDA multiple terminal value methodology resulted in an implied equity value per Crestwood common unit range of $39.62 to $53.68 based on the CEQP Financial Projections and $34.66 to $47.87 based on the CEQP

 

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Financial Projections: Case Two. The discounted cash flow analysis utilizing the perpetuity growth rate methodology to calculate terminal value resulted in an implied equity value per Crestwood common unit range of $30.31 to $52.30 based on the CEQP Financial Projections and $24.96 to $46.34 based on the CEQP Financial Projections: Case Two.

Discounted Distributions Analysis

Evercore performed a discounted distribution analysis by valuing the projected cash distributions on the Crestwood common units based on the CEQP Financial Projections during a four-year period and based on the CEQP Financial Projections: Case Two during a three-year period. Evercore discounted projected distributions using cost of equity discount rates of 10.0% to 11.0% based on CAPM as well as a terminal yield range of 8.5% to 11.5% based on Crestwood’s trailing 52-week yield range. The analyses of the projected cash distributions resulted in an implied per Crestwood common unit value range of $23.57 to $29.76 based on the CEQP Financial Projections and an implied per Crestwood common unit value range of $23.40 to $29.99 based on the CEQP Financial Projections: Case Two.

Peer Group Trading Analysis

Evercore performed a peer group trading analysis of the Crestwood common units by reviewing and comparing the market values and trading multiples of the following eight publicly traded corporations and partnerships that Evercore deemed to have certain characteristics that are similar to those of Crestwood:

 

   

Antero Midstream Corporation

 

   

EnLink Midstream, LLC

 

   

Equitrans Midstream Corporation

 

   

Hess Midstream LP

 

   

Kinetik Holdings Inc.

 

   

Summit Midstream Partners, LP

 

   

Targa Resources Corp.

 

   

Western Midstream Partners, LP

Although the peer group corporations and partnerships were compared to Crestwood for purposes of this analysis, no corporation or partnership used in the analysis is identical or directly comparable to Crestwood. In order to calculate peer group trading multiples, Evercore relied on publicly available filings with the SEC and equity research analyst estimates.

For the peer group corporations and partnerships, Evercore calculated trading multiples of Enterprise Value/Next Twelve Months (“NTM”) EBITDA, which is defined as market value of equity, plus preferred equity (as applicable), plus noncontrolling interest (as applicable), plus debt and less cash (“Enterprise Value”), divided by estimated EBITDA for the next twelve months.

The mean and median Enterprise Value to EBITDA trading multiples of the gathering and processing corporations and partnerships are set forth below.

 

Benchmark

   Mean      Median  

Enterprise Value/NTM EBITDA

     9.2x        9.1x  

 

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The table below includes relevant multiple ranges selected by Evercore based on the resulting ranges of Enterprise Value to EBITDA multiples and certain other considerations related to the specific characteristics of Crestwood noted by Evercore.

 

Benchmark

   Reference Range  

Enterprise Value/2024E EBITDA

     8.5x – 10.0x  

After adjusting for projected preferred equity, debt and cash as of December 31, 2023, and dividing by the projected number of fully-diluted Crestwood common units as of December 31, 2023, Evercore determined an implied equity value per Crestwood common unit range of $29.09 to $41.43 based on 2024E EBITDA from the CEQP Financial Projections and $27.26 to $39.29 based on 2024E EBITDA from the CEQP Financial Projections: Case Two.

Analysis of Energy Transfer

Assumptions with Respect to Energy Transfer

Evercore performed a series of analyses to derive indicative valuation ranges for the ET common units. Evercore performed its analyses utilizing the unaudited, non-public financial projections for Energy Transfer prepared and furnished by management of Energy Transfer (the “ET Financial Projections”). A summary of the ET Financial Projections is available in “—Crestwood and Energy Transfer Unaudited Prospective Financial Information,” beginning on page 72. The ET Financial Projections were not adjusted by Evercore.

Discounted Cash Flow Analysis

Evercore performed a discounted cash flow analysis of Energy Transfer by valuing the cash flows to be received by Energy Transfer based on the ET Financial Projections during a three-year period. Evercore calculated the per unit value range for the ET common units by utilizing a range of discount rates based on Energy Transfer’s WACC, as estimated by Evercore based on CAPM and terminal values based on a range of estimated EBITDA multiples and perpetuity growth rates.

Evercore assumed a range of discount rates of 6.0% to 7.0% based on Energy Transfer’s WACC, a range of EBITDA multiples of 9.0x to 11.0x applied to Energy Transfer’s terminal period EBITDA and a range of perpetuity growth rates of -0.5% to 0.5% applied to Energy Transfer’s terminal period cash flows to derive a range of enterprise values. Evercore adjusted such enterprise values for projected debt, preferred equity, noncontrolling interest and cash as of December 31, 2023 and divided the resulting equity values by the number of projected ET common units outstanding as of December 31, 2023. The discounted cash flow analysis utilizing the EBITDA multiple terminal value methodology resulted in an implied equity value per ET common unit range of $24.24 to $33.20. The discounted cash flow analysis utilizing the perpetuity growth rate methodology to calculate terminal value resulted in an implied equity value per ET common unit range of $20.87 to $33.70.

Discounted Distributions Analysis

Evercore performed a discounted distribution analysis by valuing the projected cash distributions on the ET common units based on the ET Financial Projections. Evercore discounted projected distributions using cost of equity discount rates of 9.0% to 10.0% based on CAPM as well as a terminal yield range of 7.0% to 10.0% based on Energy Transfer’s trailing 52-week yield range. This analysis of the projected cash distributions resulted in an implied per ET common unit value range of $13.70 to $18.55 based on the ET Financial Projections.

Peer Group Trading Analysis

Evercore performed a peer group trading analysis of the ET common units by reviewing and comparing the market values and trading multiples of the following eight publicly traded corporations and partnerships that Evercore deemed to have certain characteristics that are similar to those of Energy Transfer:

 

   

Enbridge Inc.

 

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Enterprise Products Partners L.P.

 

   

Kinder Morgan, Inc.

 

   

MPLX LP

 

   

ONEOK, Inc.

 

   

Targa Resources Corp.

 

   

TC Energy Corporation

 

   

The Williams Companies, Inc.

Although the peer group corporations and partnerships were compared to Energy Transfer for purposes of this analysis, no corporation or partnership used in this analysis is identical or directly comparable to Energy Transfer. In order to calculate peer group trading multiples, Evercore relied on publicly available filings with the SEC and equity research analyst estimates.

For the peer group corporations and partnerships, Evercore calculated trading multiples of Enterprise Value/NTM EBITDA, which is defined as Enterprise Value divided by estimated EBITDA for the next twelve months.

The mean and median Enterprise Value to EBITDA trading multiples of the peer group corporations and partnerships are set forth below.

 

Benchmark

   Mean      Median  

Enterprise Value/NTM EBITDA

     9.8x        9.6x  

The table below includes relevant multiple ranges selected by Evercore based on the resulting ranges of Enterprise Value to EBITDA multiples and certain other considerations related to the specific characteristics of Energy Transfer noted by Evercore.

 

Benchmark

   Reference Range  

Enterprise Value/2024E EBITDA

     9.0x – 11.0x  

After adjusting for projected preferred equity, noncontrolling interests, debt and cash as of December 31, 2023, and dividing by the number of projected ET common units outstanding as of December 31, 2023, Evercore determined an implied equity value per ET common unit range of $21.23 to $30.17 based on 2024E EBITDA from the ET Financial Projections.

Exchange Ratio Summary

Evercore analyzed the implied exchange ratios resulting from the various valuation methodologies utilized to value the Crestwood common units based on the CEQP Financial Projections and the ET common units based on the ET Financial Projections. These valuation methodologies included the Discounted Cash Flow Analyses, Discounted Distributions Analyses and Peer Group Trading Analyses. Evercore compared the low value per Crestwood common unit to the high value per ET common unit and the high value per Crestwood common unit to the low value per ET common unit for each respective analysis to derive ranges of implied exchange ratios. The resulting implied exchange ratio range using the Discounted Cash Flow Analyses (EBITDA exit) was 1.193x to 2.214x. The resulting implied exchange ratio range using the Discounted Cash Flow Analyses (perpetuity growth) was 0.899x to 2.506x. The resulting implied exchange ratio range using the Discounted Distributions Analyses was 1.271x to 2.172x. The resulting implied exchange ratio range using the Peer Group Trading Analyses was 0.964x to 1.951x.

Evercore also analyzed the implied exchange ratios resulting from the various valuation methodologies utilized to value the Crestwood common units based on the CEQP Financial Projections: Case Two and the ET

 

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common units based on the ET Financial Projections. These valuation methodologies included the Discounted Cash Flow Analyses, Discounted Distributions Analyses and Peer Group Trading Analyses. Evercore compared the low value per Crestwood common unit to the high value per ET common unit and the high value per Crestwood common unit to the low value per ET common unit for each respective analysis to derive ranges of implied exchange ratios. The resulting implied exchange ratio range using the Discounted Cash Flow Analyses (EBITDA exit) was 1.044x to 1.974x. The resulting implied exchange ratio range using the Discounted Cash Flow Analyses (perpetuity growth) was 0.741x to 2.220x. The resulting implied exchange ratio range using the Discounted Distributions Analyses was 1.261x to 2.188x. The resulting implied exchange ratio range using the Peer Group Trading Analyses was 0.904x to 1.850x.

Evercore compared the results of the foregoing analyses to the exchange ratio of 2.07 ET common units for each Crestwood common unit and noted that the exchange ratio was within or above the range of the implied exchange ratios for each of the valuation methodologies reviewed by Evercore.

General

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by Evercore. In connection with the review of the exchange ratio, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion to the Crestwood board of directors. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all the analyses. In addition, Evercore may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Evercore with respect to the exchange ratio. No corporation or partnership used in the above analyses as a comparison is directly comparable to Crestwood or Energy Transfer. Furthermore, Evercore’s analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the corporations or partnerships used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Crestwood, Energy Transfer and their respective advisors.

Evercore prepared these analyses solely for the information and benefit of the Crestwood board of directors and for the purpose of providing an opinion to the Crestwood board of directors as to whether the exchange ratio is fair, from a financial point of view, to the Crestwood common unitholders. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates. The issuance of the opinion was approved by an opinion committee of Evercore.

Except as described above, the Crestwood board of directors imposed no other instruction or limitation on Evercore with respect to the investigations made or the procedures followed by Evercore in rendering its opinion. The terms and conditions of the merger agreement and the related terms and conditions of the transaction were determined through negotiations between Partnership management and Energy Transfer management. Evercore did not recommend any specific consideration to the Crestwood board of directors or recommend that any

 

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specific consideration constituted the only appropriate consideration in the merger. Evercore’s opinion was only one of many factors considered by the Crestwood board of directors in its evaluation of the merger and should not be viewed as determinative of the views of the Crestwood board of directors with respect to the merger or the exchange ratio.

Under the terms of Evercore’s engagement letter with Crestwood and Crestwood GP, Crestwood has agreed to pay Evercore a fee of $1,500,000 upon rendering its opinion and a closing fee of $500,000 upon the closing of the merger. Evercore also accrued a fee of $250,000 upon execution of its engagement letter with Crestwood and Crestwood GP. In addition, Crestwood has agreed to reimburse Evercore for its reasonable out-of-pocket expenses (including legal fees, expenses and disbursements) incurred in connection with its engagement and to indemnify Evercore, its affiliates and any of its or their respective members, partners, officers, directors, advisors, representatives, employees, agents, affiliates or controlling persons, if any, against certain liabilities and expenses arising out of its engagement, or to contribute to payments which any of such persons might be required to make with respect to such liabilities. Evercore’s engagement letter with Crestwood and Crestwood GP includes a consent to reproduce Evercore’s opinion in full in certain SEC filings related to the proposed merger, including this proxy statement/prospectus.

During the two-year period prior to the date hereof, Evercore and its affiliates have not been engaged to provide financial advisory or other services to Crestwood or Energy Transfer or their affiliates and Evercore has not received any compensation from Crestwood or Energy Transfer or their affiliates during such period. Evercore and its affiliates may provide financial advisory or other services to Crestwood and Energy Transfer or their affiliates in the future, and in connection with any such services Evercore may receive compensation.

Evercore and its affiliates engage in a wide range of activities for its and their own accounts and the accounts of customers, including corporate finance, mergers and acquisitions, equity sales, trading and research, private equity, placement agent, asset management and related activities. In connection with these businesses or otherwise, Evercore and its affiliates and/or its or their respective employees, as well as investment funds in which any of them may have a financial interest, may at any time, directly or indirectly, hold long or short positions and may trade or otherwise effect transactions for their own accounts or the accounts of customers, in debt or equity securities, senior loans and/or derivative products or other financial instruments of or relating to Crestwood, Energy Transfer, and/or any of their respective affiliates or persons that are competitors, customers or suppliers of Crestwood or Energy Transfer and/or any of their respective affiliates.

Energy Transfer’s Reasons for the Merger

In evaluating the merger, the ET board of directors consulted with Energy Transfer’s management and legal and financial advisors. The ET board of directors determined the merger to be in the best interests of Energy Transfer based on, among other factors, its belief that the merger will:

 

   

Be Accretive to Cash Flow. Energy Transfer expects the merger to be accretive to its distributable cash flow per ET common unit, both immediately and over the long-term.

 

   

Extend Energy Transfer’s Position in the Value Chain Deeper into Key Basins. Energy Transfer believes that Crestwood’s substantial gathering and processing capacity in the Williston Basin and the Delaware Basin will complement Energy Transfer’s significant downstream fractionation capacity at Mont Belvieu and its hydrocarbon export capability from both Nederland, Texas and the Marcus Hook complex in Philadelphia, Pennsylvania. As such, the acquisition will extend Energy Transfer’s position in the value chain deeper into the Williston and Delaware basins.

 

   

Facilitate Entry into the Powder River Basin. The merger is expected to facilitate Energy Transfer’s entry into the Powder River Basin through the acquisition of Crestwood’s gathering and processing system in that basin.

 

   

Provide New Growth Opportunities. Energy Transfer expects that the merger will provide an attractive portfolio of accretive organic growth opportunities around Crestwood’s existing footprint via new

 

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producer drilling and completion activity as well as numerous private bolt-on and acquisition opportunities around Crestwood’s systems.

 

   

Create Synergies and Cost Savings. Energy Transfer expects that the combination of its infrastructure with Crestwood’s complementary assets will allow Energy Transfer to pursue additional commercial opportunities, enhance its ability to serve customers and achieve cost savings. The merger is also expected to provide benefits to Energy Transfer’s NGL & Refined Products and Crude Oil businesses with the addition of strategically located storage and terminalling assets, as well as trucking and rail terminals. These systems are anchored by predominantly investment-grade producer customers with firm, long-term value upside through the combination.

 

   

Maintain Investment Grade Status. Energy Transfer expects that the combination will allow Energy Transfer to maintain its investment grade credit metrics and that the merger will provide opportunities to refinance existing Crestwood debt at a lower cost of capital utilizing Energy Transfer’s investment grade balance sheet.

Crestwood and Energy Transfer Unaudited Prospective Financial Information

Crestwood and Energy Transfer do not, as a matter of course, make public long-term projections as to future sales, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates. As a result, Crestwood and Energy Transfer do not endorse the unaudited prospective financial information as a reliable indication of future results. However, the management of Crestwood and Energy Transfer have included the unaudited prospective financial information set forth below to present the financial information made available and utilized in connection with the Crestwood board of directors’ evaluation of the merger and the other transactions contemplated by the merger agreement. Evercore used the unaudited prospective financial information in connection with its financial analyses and opinion described in the section titled “Opinion of Crestwood’s Financial Advisor” with the approval of the Crestwood board of directors. The inclusion of this information should not be regarded as an indication that any of Crestwood, Energy Transfer, their respective advisors or other representatives or any other recipient of this information considered, or now considers, this information to be necessarily predictive of actual future performance or events, or that it should be construed as financial guidance, and such summary projections set forth below should not be relied on as such. The unaudited prospective financial information is not being included in this proxy statement/prospectus in order to influence any Crestwood unitholder to make an investment decision with respect to the merger or to influence any Crestwood unitholder as to whether such unitholder should vote for or against the merger proposal or any other proposal to be considered at the special meeting.

This information was prepared solely for internal use and is subjective in many respects. The Crestwood unaudited prospective financial information and the Energy Transfer unaudited prospective financial information (collectively referred to herein as the “unaudited prospective financial information”) were based solely upon information available to Crestwood’s management and Energy Transfer’s management, respectively, at the time of their preparation.

While presented with numeric specificity, the unaudited prospective financial information reflects numerous estimates and assumptions that were deemed to be reasonable as of the respective dates the estimates and assumptions were made, but are inherently uncertain and may be beyond the control of Crestwood’s and Energy Transfer’s management. These assumptions include, but are not limited to, Crestwood’s and Energy Transfer’s future results, oil and gas industry activity, commodity prices, demand for natural gas and crude oil, capital availability, general economic and regulatory conditions and other matters described in the sections entitled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors.” The unaudited prospective financial information reflects both assumptions as to certain business decisions that are subject to change and, in many respects, subjective judgment, and thus is susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. Crestwood and Energy Transfer can give no assurance

 

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that the unaudited prospective financial information and the underlying estimates and assumptions will be realized.

In addition, since the unaudited prospective financial information is inherently forward-looking and covers multiple years, such information by its nature becomes less predictive with each successive year. Actual results may differ materially from those set forth below, and important factors that may affect actual results and cause the unaudited prospective financial information to be inaccurate include, but are not limited to, risks and uncertainties relating to Crestwood’s and Energy Transfer’s businesses, industry performance, the regulatory environment, general business and economic conditions and other matters described under the sections of this proxy statement/prospectus entitled “Risk Factors,” “Cautionary Statement Regarding Forward-Looking Statements” and “Where You Can Find More Information.”

The accompanying unaudited prospective financial information was not prepared with a view toward public disclosure, nor was it prepared with a view toward compliance with GAAP, published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of Crestwood’s and Energy Transfer’s management, respectively, was prepared on a reasonable basis, reflects the best estimates and judgments then-available, and presents, to the best of their knowledge and belief, the then-expected course of action and financial performance of Crestwood and Energy Transfer, respectively. However, this information is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue reliance on the unaudited prospective financial information. Neither Crestwood’s independent registered public accounting firm, nor Energy Transfer’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the unaudited prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the unaudited prospective financial information. The reports of the independent registered public accounting firms of Crestwood and/or Energy Transfer contained in their respective Annual Reports on Form 10-K for the year ended December 31, 2022, which are incorporated by reference into this proxy statement/prospectus, relate to historical financial information of Crestwood and Energy Transfer, respectively, and such reports do not extend to the unaudited prospective financial information included below and should not be read to do so. The unaudited prospective financial information set forth in this proxy statement/prospectus has been prepared by, and is the responsibility of, Crestwood’s and Energy Transfer’s management, respectively.

Furthermore, the unaudited prospective financial information does not take into account any circumstances or events occurring after the date it was prepared. Crestwood and Energy Transfer can give no assurance that, had the unaudited prospective financial information been prepared either as of the date of the merger agreement or as of the date of this proxy statement/prospectus, similar estimates and assumptions would be used. Except as required by applicable securities laws, Crestwood and Energy Transfer do not intend to, and disclaim any obligation to, make publicly available any update or other revision to the unaudited prospective financial information to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, including with respect to the accounting treatment of the merger under GAAP, or to reflect changes in general economic or industry conditions.

The unaudited prospective financial information does not take into account any of the possible financial and other effects on Crestwood or Energy Transfer of the merger, the effect on Crestwood or Energy Transfer of any business or strategic decision or action that has been or will be taken as a result of the merger agreement having been executed, or the effect of any business or strategic decisions or actions that would likely have been taken if the merger agreement had not been executed, but which were instead altered, accelerated, postponed or not taken in anticipation of the merger. Further, the unaudited prospective financial information does not take into account the effect on Crestwood or Energy Transfer of any possible failure of the merger to occur. None of Crestwood, Energy Transfer, or their respective affiliates, officers, directors, advisors or other representatives has made,

 

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makes or is authorized in the future to make any representation to any Crestwood or Energy Transfer unitholder or other person regarding Crestwood’s or Energy Transfer’s ultimate performance compared to the information contained in the unaudited prospective financial or operating information or that the forecasted results will be achieved. The inclusion of the unaudited prospective financial or operating information herein should not be deemed an admission or representation by Crestwood, Energy Transfer, or their respective advisors or any other person that it is viewed as material information of Crestwood or Energy Transfer, particularly in light of the inherent risks and uncertainties associated with such forecasts. The summary of the unaudited prospective financial information included below is not being included to influence your decision whether to vote in favor of the merger proposal or any other proposal to be considered at the special meeting, but is being provided solely because certain of such information was among the financial information made available to and utilized in connection with the Crestwood board of directors’ evaluation of the merger and the other transactions contemplated by the merger agreement.

In light of the foregoing, and considering that the special meeting may be held several months after the unaudited prospective financial information was prepared, as well as the uncertainties inherent in any forecasted information, Crestwood unitholders are cautioned not to place undue reliance on such information, and Crestwood urges all Crestwood unitholders to review Crestwood’s most recent SEC filings for a description of Crestwood’s reported financial results and Energy Transfer’s most recent SEC filings for a description of Energy Transfer’s reported financial results, as described in the section entitled “Where You Can Find More Information.”

Unaudited Prospective Financial Information Regarding Crestwood

In preparing the unaudited prospective financial information described below, Crestwood’s management applied the current operating model to two different commodity pricing scenarios, which are referred to in this section as “Case One” and “Case Two.” Case One was based on Crestwood management’s outlook for future commodity price levels as of February 3, 2023 and Case Two was based on Energy Transfer management’s outlook for future commodity price levels as of (a) July 7, 2023, with respect to the year ending December 31, 2023 and (b) April 10, 2023, with respect to the years ending December 31, 2024, 2025 and 2026. Other than with respect to the commodity prices shown below, Case One and Case Two include the same underlying assumptions.

Case One

 

     For the Years Ending December 31,  
     2024E      2025E      2026E      2027E  

WTI ($/Bbl)

   $ 75.00      $ 75.00      $ 75.00      $ 75.00  

Henry Hub ($/MMBtu)

   $ 4.50      $ 4.50      $ 4.50      $ 4.50  

Mont Belvieu ($/gal) – C2

   $ 0.35      $ 0.35      $ 0.35      $ 0.35  

Mont Belvieu ($/gal) – C3

   $ 0.89      $ 0.89      $ 0.89      $ 0.89  

Mont Belvieu ($/gal) – iC4

   $ 1.11      $ 1.11      $ 1.11      $ 1.11  

Mont Belvieu ($/gal) – nC4

   $ 1.09      $ 1.09      $ 1.09      $ 1.09  

Mont Belvieu ($/gal) – C5+

   $ 1.57      $ 1.57      $ 1.57      $ 1.57  

 

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Case Two

 

     For the Years Ending December 31,  
     2024E      2025E      2026E  

WTI ($/Bbl)

   $ 72.92      $ 68.22      $ 64.59  

Henry Hub ($/MMBtu)

   $ 3.53      $ 4.17      $ 4.25  

Mont Belvieu ($/gal) – C2

   $ 0.24      $ 0.26      $ 0.27  

Mont Belvieu ($/gal) – C3

   $ 0.80      $ 0.73      $ 0.66  

Mont Belvieu ($/gal) – iC4

   $ 0.95      $ 0.86      $ 0.79  

Mont Belvieu ($/gal) – nC4

   $ 0.91      $ 0.84      $ 0.81  

Mont Belvieu ($/gal) – C5+

   $ 1.50      $ 1.40      $ 1.36  

In addition to the assumptions above regarding commodity prices, in developing the unaudited prospective financial information, Crestwood’s management made numerous assumptions regarding Crestwood’s business, including, but not limited to:

 

   

Rig activity and well connects across gathering and processing assets based on producer customer development plans and long-term guidance;

 

   

Gross margin across gathering and processing and storage and logistics assets reflects existing contracts and Crestwood’s commercial discussions and perspectives regarding re-contracting and new contracts;

 

   

Operating and maintenance expenses across all service offerings;

 

   

General and administrative expenses for corporate overhead;

 

   

Growth capital expenditures, primarily to build out the pipeline and compression infrastructure necessary to service the volume forecast of Crestwood’s customers;

 

   

Maintenance capital expenditures to continue operating assets according to safety, environmental, compliance and reliability standards;

 

   

Interest rates on debt as follows:

 

   

Crestwood Credit Agreement: Approximately 7.25% in 2023 decreasing to approximately 6.50% in 2024, approximately 5.75% in 2025, and approximately 5.50% in 2026 and 2027, respectively; and

 

   

Crestwood Senior Notes: Approximately 5.75% to 8.00% with maturities ranging from 2025 through 2032;

 

   

Crestwood common units outstanding:

 

   

105.1 million Crestwood common and restricted units; and

 

   

105.6 million fully-diluted Crestwood common units;

 

   

Quarterly distributions per Crestwood common unit remain at $0.655 through projection period;

 

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The following table presents selected unaudited prospective financial data of Crestwood (referred to herein as the “Crestwood unaudited prospective financial information”):

 

    Case One     Case Two  
    Year ending December 31,     Year ending December 31,  
    2023E     2024E     2025E     2026E     2027E     2023E     2024E     2025E     2026E     2027E(5)  

Adjusted EBITDA (in millions)(1)

  $ 800     $ 869     $ 905     $ 928     $ 943     $ 800     $ 846     $ 880     $ 897     $ N/A  

Distributable Cash Flow (in millions)(2)

  $ 446     $ 529     $ 577     $ 612     $ 641     $ 446     $ 509     $ 553     $ 580     $ N/A  

Distributable Cash Flow per Crestwood common unit(3)

  $ 4.22     $ 5.01     $ 5.47     $ 5.80     $ 6.07     $ 4.22     $ 4.82     $ 5.24     $ 5.49     $ N/A  

Total Distribution Coverage Ratio(4)

    1.62x       1.92x       2.09x       2.22x       2.33x       1.62x       1.85x       2.01x       2.10x       N/A  

Growth Capital Expenditures (in millions)

  $ 145     $ 114     $ 80     $ 81     $ 62     $ 145     $ 114     $ 80     $ 81     $ N/A  

Maintenance Capital Expenditures (in millions)

  $ 29     $ 26     $ 26     $ 26     $ 26     $ 29     $ 26     $ 26     $ 26     $ N/A  

 

(1)

Adjusted EBITDA is defined as income (loss) before income taxes, plus debt-related costs (interest and debt expense, net and gain (loss) on modification/extinguishment of debt) and depreciation, amortization and accretion expense, after considering the adjusted earnings impact of Crestwood’s unconsolidated affiliates by adjusting equity earnings or losses from Crestwood’s unconsolidated affiliates to reflect Crestwood’s proportionate share (based on the distribution percentage) of their EBITDA, excluding gains and losses on long-lived assets and other impairments. Adjusted EBITDA also considers the impacts of additional significant items including: unit based compensation expense, third party costs incurred related to potential and completed acquisitions, certain environmental remediation costs, the change in fair value of commodity inventory-related derivative contracts and costs associated with the realignment and restructuring of our operations and corporate structure.

(2)

Distributable Cash Flow is defined as Adjusted EBITDA adjusted for cash interest expense, maintenance capital expenditures, income taxes, Crestwood’s proportionate share (based on the distribution percentage) of its unconsolidated affiliates’ distributable cash flow, and expense related to distributions to the holders of the preferred units under the Niobrara LLC Agreement (as defined in the merger agreement) and the Crestwood preferred unitholders.

(3)

Distributable Cash Flow per Crestwood common unit is defined as (A) Distributable Cash Flow divided by (B) the expected number of Crestwood common units on a fully-diluted basis.

(4)

Total Distribution Coverage Ratio is defined as (A) Distributable Cash Flow divided by (B) distributions expected to be made to the Crestwood common unitholders.

(5)

The projected period in Case Two ends in 2026. Energy Transfer management made no projections for 2027 using Case Two commodity price assumptions and therefore Crestwood management made no Case Two projections for 2027.

Unaudited Prospective Financial Information Regarding Energy Transfer

Energy Transfer provided certain unaudited prospective financial information of Energy Transfer, on a standalone basis, for the years 2023 to 2026 to Crestwood. The Energy Transfer unaudited prospective financial information provided by Energy Transfer management was based on Energy Transfer management’s outlook for future commodity price levels as of (a) July 7, 2023, with respect to the year ending December 31, 2023 and (b) April 10, 2023, with respect to the years ending December 31, 2024, 2025 and 2026, which is the same as

 

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the Case Two commodity price assumptions shown above in the section titled “Unaudited Prospective Financial Information Regarding Crestwood.”

In addition to the assumptions regarding commodity prices, in developing the unaudited prospective financial information, Energy Transfer’s management made numerous assumptions regarding Energy Transfer’s business, including, but not limited to:

 

   

Quarterly distributions per ET common unit of $0.315 expected in 2023 to increase to $0.345 expected in 2026;

 

   

Expected cash taxes of $86 million in 2023, $116 million in 2024, $286 million in 2025 and $314 million in 2026; and

 

   

Approximately 50% of growth capital from 2024-2026 is earmarked for long-term projects with anticipated earnings commencing outside the forecast period.

The following table presents selected unaudited prospective financial data of Energy Transfer (referred to herein as the “Energy Transfer unaudited prospective financial information”):

 

     Year ending December 31,  
     2023E      2024E      2025E      2026E  

Adjusted EBITDA (consolidated) (in millions) (1)

   $ 13,331      $ 14,084      $ 14,433      $ 14,752  

Distributable Cash Flow attributable to the partners of Energy Transfer (in millions) (2)

   $ 7,142      $ 7,623      $ 7,621      $ 7,887  

Distributable Cash Flow per ET common unit (3)

   $ 2.27      $ 2.42      $ 2.41      $ 2.49  

Distribution Coverage Ratio (4)

     1.82x        1.88x        1.82x        1.82x  

Growth Capital Expenditures (in millions)

   $ 2,265      $ 3,000      $ 3,000      $ 3,000  

Maintenance Capital Expenditures (in millions)

   $ 874      $ 880      $ 947      $ 902  

 

(1)

Adjusted EBITDA (consolidated) is defined as total partnership earnings before interest, taxes, depreciation, depletion, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt, and other non-operating income or expense items. Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates.

(2)

Distributable Cash Flow attributable to partners is defined as net income, adjusted for certain non-cash items, less distributions to preferred unitholders and maintenance capital expenditures. Non-cash items include depreciation, depletion and amortization, non-cash compensation expense, amortization included in interest expense, gains and losses on disposals of assets, the allowance for equity funds used during construction, unrealized gains and losses on commodity risk management activities, inventory valuation adjustments, non-cash impairment charges, losses on extinguishments of debt and deferred income taxes. For unconsolidated affiliates, Distributable Cash Flow attributable to partners reflects Energy Transfer’s proportionate share of the investee’s distributable cash flow. To the extent that noncontrolling interests exist among Energy Transfer’s subsidiaries, Distributable Cash Flow attributable to partners reflects the following:

 

   

For subsidiaries with publicly traded equity interests, Distributable Cash Flow attributable to partners includes distributions to be received by the parent company with respect to the periods presented.

 

   

For consolidated joint ventures or similar entities, where the noncontrolling interest is not publicly traded, Distributable Cash Flow attributable to partners reflects only the amount of distributable cash flow of such subsidiaries that is attributable to Energy Transfer’s ownership interest.

 

(3)

Distributable Cash Flow per ET common unit is defined as (A) Distributable Cash Flow attributable to partners divided by (B) the expected number of ET common units outstanding.

 

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(4)

Distribution Coverage Ratio is defined as (A) Distributable Cash Flow attributable to partners divided by (B) distributions expected to be made to the partners of Energy Transfer with respect to such period.

Other Information

Certain of the measures included in the Crestwood unaudited prospective financial information and the Energy Transfer unaudited prospective financial information are non-GAAP financial measures, including, but not limited to, EBITDA, Adjusted EBITDA, Distributable Cash Flow, Distributable Cash Flow per Crestwood common unit, Distributable Cash Flow per ET common unit, Total Distribution Coverage Ratio and Total Capital Expenditures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Crestwood and Energy Transfer, respectively, are not reported by all of their competitors and may not be comparable to similarly titled amounts used by other companies.

CRESTWOOD AND ENERGY TRANSFER DO NOT INTEND TO, AND DISCLAIM ANY OBLIGATION TO, UPDATE, CORRECT OR OTHERWISE REVISE THE CRESTWOOD UNAUDITED PROSPECTIVE FINANCIAL INFORMATION OR THE ENERGY TRANSFER UNAUDITED PROSPECTIVE FINANCIAL INFORMATION TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE OF THE MERGER AGREEMENT OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE CRESTWOOD UNAUDITED PROSPECTIVE FINANCIAL INFORMATION OR THE ENERGY TRANSFER UNAUDITED PROSPECTIVE FINANCIAL INFORMATION ARE NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM).

Interests of Crestwood’s Directors and Executive Officers in the Merger

In considering the recommendation of the Crestwood board of directors that you vote to approve and adopt the merger agreement and the merger, you should be aware that aside from their interests as Crestwood unitholders, Crestwood’s directors and executive officers have interests in the merger that are different from, or in addition to, those of other Crestwood unitholders generally. The members of the Crestwood board of directors were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to the Crestwood unitholders that the merger agreement and the merger be adopted. See the section above entitled “—Background of the Merger,” and the section titled “—Recommendation of the Crestwood Board of Directors and Reasons for the Merger.” Crestwood’s unitholders should take these interests into account in deciding whether to vote “FOR” the merger proposal. These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.

 

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Treatment of Equity-Based Awards

In the merger, each Crestwood restricted unit will be entitled to receive the common unit merger consideration. The vesting restrictions applicable to each Crestwood restricted unit that has a grant date prior to January 1, 2023 (each, a “Pre-2023 Restricted Unit”) will lapse immediately prior to the effective time. For all other Crestwood restricted units (each, a “Post-2023 Restricted Unit”), the same restrictions and other terms and conditions that were applicable immediately prior to the effective time will continue to apply after the effective time.

 

Name

   Pre-2023
Restricted
Units
     Post-2023
Restricted
Units
 

Non-Employee Directors

     

Warren H. Gfeller

            4,200  

Janeen S. Judah

            4,200  

David Lumpkins

            4,200  

Angela A. Minas

            4,200  

Gary D. Reaves(1)

             

John J. Sherman

            4,200  

Frances M. Vallejo

            4,200  

Clay C. Williams

            4,200  

Executive Officers

     

Robert G. Phillips

     201,545        96,811  

Robert T. Halpin

     85,228        55,320  

John W. Black

     29,283        23,825  

William H. Moore

     61,726        38,213  

Steven M. Dougherty(2)

             

Joel C. Lambert

     65,434        42,762  

Diaco M. Aviki

     26,708        33,505  

 

(1)

Mr. Reaves elected to forego the 2023 annual award of restricted units.

(2)

Mr. Dougherty ceased service with the company at the end of the second quarter of 2023.

Crestwood Performance Units

Each Crestwood performance unit that has a grant date prior to January 1, 2023 or that is otherwise vested at the effective time (each, a “pre-2023 Performance Unit”) will be cancelled at the effective time in exchange for (i) the common unit merger consideration in respect of the corresponding number of Crestwood common units (including any reinvested distribution equivalent rights) issuable pursuant to such Crestwood performance unit based upon the attainment of the applicable Crestwood performance assumption (as described below) and (ii) an amount in cash equal to any accrued but unpaid cash distribution equivalents with respect to such Crestwood performance units. All other Crestwood performance units (each, a “Post-2023 Performance Unit”) will be assumed by Energy Transfer and converted into a time-based phantom unit award (the “assumed performance unit awards”) representing a contractual right upon vesting to receive a number of Energy Transfer common units equal to the product obtained by multiplying (i) the number of Crestwood common units subject to such assumed performance unit award immediately prior to the effective time assuming attainment of the applicable Crestwood performance assumption (including any reinvested distribution equivalent rights) by (ii) the exchange ratio. Each assumed performance unit award will otherwise be subject to the same terms and conditions that were applicable to the corresponding Crestwood performance unit immediately prior to the effective time other than the performance-based vesting conditions and, in the event any distribution is declared in respect of ET common units, the corresponding distribution equivalent right for each assumed performance unit award will be settled within 30 days following the time when distributions are paid to ET common unitholders generally. The “Crestwood performance assumptions” are as follows: (A) with respect to a Pre-2023 Performance Unit, a

 

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performance multiplier of 100%, and (B) with respect to a Post-2023 Performance Unit, the target level of performance for the relevant Crestwood performance unit.

 

Name

   Pre-2023
Performance
Units (100%)
     Reinvested
Distribution
Equivalents
(pre-2023)
     Post-2023
Performance
Units
(Target)
     Reinvested
Distribution
Equivalents (post-
2023)
 

Robert G. Phillips

     95,502        17,965        94,256        4,864  

Robert T. Halpin

     26,015        4,666        29,001        1,497  

John W. Black

     3,766        584        12,490        645  

William H. Moore

     24,879        4,280        20,193        1,042  

Steven M. Dougherty(1)

     5,000        1,300                

Joel C. Lambert

     24,105        4,265        22,418        1,157  

Diaco M. Aviki

     5,822        904        17,565        906  

 

(1)

Mr. Dougherty ceased service with the company at the end of the second quarter of 2023 and, according to his separation agreement, certain Pre-2023 Performance Units will continue to vest according to their terms.

Other Benefits

Short-Term Incentive Plan

Crestwood’s executive officers are eligible to receive an annual bonus each year pursuant to their respective employment agreements, the value of which is based on certain company key performance indicators and individual performance reviews. The value of an annual bonus could range from 0% to 200% of such executive officer’s target bonus for a given year. With respect to the bonus payments for the 2023 calendar year, if the closing occurs prior to the time when annual bonus payments are customarily paid, the bonus payments will be paid based on a 100% target opportunity level, when such bonus payments would have otherwise normally paid out, subject to the executive officer’s continued employment through the date of payment (or, if earlier, upon a termination without cause, subject to the executive officer’s execution and non-revocation of a release of claims).

Severance for Crestwood Executives

The severance benefits for each of Crestwood’s executive officers are set forth in such executive officer’s employment agreement. If an executive officer’s employment is terminated by their employer without “employer cause,” the executive officer resigns due to “employee cause” or the executive officer’s employment terminates as a result of death or permanent disability (each, a “qualifying termination”), or the employer’s election not to renew the applicable employment agreement, the executive officer will be entitled to receive, subject to the executive officer’s execution of a release of claims, severance equal to two (or, in the case of Mr. Phillips, three) times the sum of the executive’s base salary and average annual bonus for the prior two years, payable in equal installments over an 18-month period following termination. In addition, the executive officer would be entitled to receive subsidized medical benefits at active employee rates over such 18-month period.

Under the terms of the executive officers’ employment agreements (other than for Mr. Phillips), if the executive officer incurs a qualifying termination during the period beginning three months prior to a Change of Control and ending twelve months after a Change of Control, then the severance amount payable shall be increased to three times the sum of such executive officer’s base salary and average annual bonus for the prior two years.

If an executive officer fails to comply with the covenants in his employment agreement (such as non-compete restrictions), the release of claims or similar agreement, such executive officer shall forfeit the right to receive any severance payment installments following such failure to comply.

 

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For purposes of the executive officers’ employment agreements, the following terms are generally defined as follows:

 

   

“Employee Cause” will exist if one of the following occurs: (A) a substantial and continuing diminution in the nature of the employee’s title, duties, responsibilities or reporting relationship (including (x) no longer reporting directly to the board of directors or similar body of any successor to the employer, Crestwood GP or Crestwood, as applicable (the “Governing Body”) or (y) reporting to an officer whose reporting relationship to either the Governing Body or, if applicable, to the Chief Executive Officer has been diminished); (B) a material breach by the employer of any material provision of the applicable employment agreement; (C) a material and continuing reduction in the aggregated total of the employee’s base salary, target annual bonus percentage and target equity percentage; (D) a reassignment by the employer of the employee’s principal place of employment to a location more than 25 miles from his principal place of employment on January 1, 2023, but excluding normal business travel consistent with the employee’s duties, responsibilities and position.

 

   

“Permanent Disability” means the inability of the employee, with or without reasonable accommodation, by reason of illness, incapacity, or other disability, to perform the employee’s duties or fulfill the employee’s employment obligations to the employer, as determined by the employer’s board of directors and as certified in writing by a competent medical physician chosen by such board of directors, for a cumulative total of 180 days in any 12-month period; provided, however, that such period of absence may be extended if required by applicable law.

 

   

“Change of Control,” means and shall be deemed to have occurred upon one or more of the following events: (i) any direct or indirect sale, lease, exchange, liquidation, division or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Partnership to any person or persons, other than to one or more affiliates; (ii) the consolidation, reorganization, merger, recapitalization, exchange, division or other similar transaction (in one transaction or a series of related transactions) (any such transaction or series of transactions referred to herein as a “Merger”) pursuant to which (a) more than 50% of the combined voting power of the outstanding equity interests in Crestwood GP or its successor entities cease to be owned, directly or indirectly, by Crestwood, (b) more than 50% of the combined voting power of the outstanding equity interests in Crestwood or its successor entities cease to be, directly or indirectly, owned immediately following the Merger by the owners of such interests immediately prior to the Merger, or (c) Crestwood GP or one or more other affiliates of Crestwood cease to be general partner(s) of Crestwood or its successor; (iii) a person or group other than Crestwood or its consolidated subsidiaries directly or indirectly becoming the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act) of more than 35% of the voting power of the then outstanding common units of Crestwood or its successor; or (iv) individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board or of the board of directors or equivalent body of any successor parent of Crestwood or of Crestwood GP; provided, however, that any individual becoming a director subsequent to the date of the adoption of this definition whose election or nomination for election by Crestwood’s unitholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board in the ordinary course of business shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board or otherwise outside the ordinary course of business.

 

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The table below summarizes the value of severance payments and benefits that each executive officer may be entitled to receive upon a qualifying termination during the period beginning three months prior to a Change of Control and ending twelve months after a Change of Control, pursuant to the terms of their respective employment agreements.

 

Name

   Cash
Severance(1)
     2023 Target
Bonus(2)
     Value of Subsidized
Medical Benefits
     Accrued, Unused
Vacation Pay(3)
 

Robert G. Phillips

   $ 6,675,000        1,000,000      $ 25,618      $ 61,538  

Robert T. Halpin

   $ 4,218,000        720,000      $ 29,613      $ 46,154  

John W. Black

   $ 2,233,740        360,001      $ 29,896      $ 30,769  

William H. Moore

   $ 3,161,250        425,000      $ 29,619      $ 32,692  

Steven M. Dougherty(4)

                           

Joel C. Lambert

   $ 3,059,700        422,999      $ 29,896      $ 36,154  

Diaco M. Aviki

   $ 2,457,900        360,001      $ 29,896      $ 34,615  

 

(1)

Assumes a termination in connection with a Change of Control on December 31, 2023.

(2)

The parties have agreed to pay an amount equal to an employee’s target bonus when such bonus payments would have otherwise normally paid out (or, if earlier, upon a termination without cause), subject to the terms and conditions described above.

(3)

Assumes a full balance of 160 hours unused vacation hours.

(4)

Mr. Dougherty ceased service with the company at the end of the second quarter of 2023.

Go-Forward Arrangements

As of the date of this proxy statement/prospectus, neither Energy Transfer nor Crestwood is contemplating entering into new employment or compensation arrangements with any of the executive officers or non-employee directors of Crestwood.

Indemnification and Insurance

Pursuant to the terms of the merger agreement, Crestwood’s directors and executive officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies from Energy Transfer and the surviving entity. Such indemnification is further described in the section titled “The Merger Agreement—Indemnification and Insurance.”

Quantification of Payments and Benefits to Crestwood’s Named Executive Officers

The information set forth below is required by Item 402(t) of Regulation S-K regarding compensation that is based on or otherwise relates to the merger that Crestwood’s named executive officers could receive in connection with the merger. Such amounts have been calculated assuming that (i) the closing of the merger occurs on December 31, 2023, (ii) each of Crestwood’s named executive officers experiences a termination of employment without cause immediately following the effective time of the merger in a manner that entitles each of them to receive severance payments and benefits under their respective employment agreements and vesting of all equity awards (each as described above), (iii) none of Crestwood’s named executive officers will receive any additional equity-based awards following the date hereof, (iv) the closing price of a Crestwood common unit at the effective time of the merger is $27.40 (which represents the average closing price of a common unit of Crestwood over the first five business days following the first public announcement of the merger), (v) the Crestwood named executive officers’ base salary and annual target bonus opportunities remain unchanged from those in place as of August 14, 2023, (vi) each of Crestwood’s named executive officers has properly executed any required releases and complied with all requirements (including any applicable restrictive covenants) necessary to receive such payments and benefits and (vii) each number is rounded to the nearest whole number. Some of the assumptions used in the table below are based upon information not currently available, and, as a result, the actual amounts to be received by any of Crestwood’s named executive officers may materially differ from the amounts set forth below.

 

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Golden Parachute Compensation

 

Name

   Cash(1)      Equity(2)      Perquisites/
Benefits(3)
     Other      Total  

Robert G. Phillips

   $ 7,736,538      $ 14,074,167      $ 25,618             $ 21,836,323  

John W. Black

   $ 2,624,510      $ 1,937,097      $ 29,896             $ 4,591,503  

Robert T. Halpin

   $ 4,984,154      $ 5,547,407      $ 29,613             $ 10,561,174  

William H. Moore

   $ 3,618,942      $ 4,138,230      $ 29,619             $ 7,786,791  

Steven M. Dougherty(4)

                                  

Joel C. Lambert

   $ 3,518,853      $ 4,406,439      $ 29,896             $ 7,955,188  

 

(1)

Amounts shown include severance benefits triggered upon a qualifying termination occurring within three months before or 12 months after a change in control, which consist of (i) cash severance equal to three times the sum of the named executive officer’s base salary and average annual bonus for the prior two years, payable in equal installments over an 18-month period following termination, (ii) accrued but unused vacation pay, and (iii) bonus payments pursuant to Crestwood’s Short Term Incentive Plan for the 2023 calendar year calculated at 100% of the target opportunity level for each named executive officer. Such bonus payments will be paid in a lump sum upon termination. These amounts are considered “double-trigger” payments, which means that both a change in control, such as the merger, and another event (i.e., a termination without cause or resignation for good reason) must occur prior to the payments becoming due. For more detail on these payments, see “Severance under Crestwood Employment Agreements.”

(2)

Amounts shown reflect the sum of the potential value that each named executive officer could receive in connection with both the “single-trigger” and “double-trigger” accelerated vesting of all outstanding restricted units, performance units, and assumed performance units (with the value attributable to such performance units and assumed performance units calculated based on the Crestwood performance assumptions and any reinvested distribution equivalent rights). Amounts associated with the Pre-2023 Performance Units and the assumed performance units are only an estimate as the actual amounts will take into consideration the amount of any reinvested distribution equivalents arising from any distributions declared prior to the closing. The Pre-2023 Restricted Units and Pre-2023 Performance Units (collectively, the “Pre-2023 Units”) are considered “single-trigger” payments, which means that only a change in control, such as the merger, must occur for the awards to become fully vested. The amounts set forth in this column that are attributable to the single-trigger vesting Pre-2023 Units (excluding reinvested distribution equivalents and accrued but unpaid cash distribution equivalents) are as follows: $8,139,088 for Mr. Phillips, $905,543 for Mr. Black, $3,048,058 for Mr. Halpin, $2,372,977 for Mr. Moore, and $2,453,368 for Mr. Lambert. The amount of reinvested distribution equivalent rights relating to such single-trigger vesting Pre-2023 Performance Units are as follows: $492,252 for Mr. Phillips, $16,014 for Mr. Black, $127,853 for Mr. Halpin, $117,278 for Mr. Moore, and $116,859 for Mr. Lambert. The amount of accrued but unpaid cash distribution equivalents relating to such single-trigger vesting Pre-2023 Performance Units are as follows: $74,321 for Mr. Phillips, $2,850 for Mr. Black, $20,096 for Mr. Halpin, $19,099 for Mr. Moore, and $18,582 for Mr. Lambert. The Post-2023 Restricted Units and Post-2023 Performance Units (collectively, the “Post-2023 Units”) are considered “double-trigger” payments, which means that both a change in control, such as the merger, and another event (i.e., a termination without cause or resignation for good reason) must occur prior to the awards becoming fully vested. The amounts set forth in this column that are attributable to the double-trigger vesting Post-2023 Units (excluding reinvested distribution equivalents) are as follows: $5,235,236 for Mr. Phillips, $995,031 for Mr. Black, $2,310,395 for Mr. Halpin, $1,600,324 for Mr. Moore, and $1,785,932 for Mr. Lambert. The amount of reinvested distribution equivalent rights relating to such double-trigger vesting Post-2023 Performance Units are as follows: $133,270 for Mr. Phillips, $17,660 for Mr. Black, $41,005 for Mr. Halpin, $28,551 for Mr. Moore, and $31,697 for Mr. Lambert. For more details regarding these equity awards, please see the “Treatment of Equity-Based Awards” section above.

(3)

Amounts shown reflect the value of subsidized medical benefits at active employee rates for up to 18 months that each named executive officer could receive upon a qualifying termination occurring within three months before or 12 months after a change in control, pursuant to their respective employment agreements. As such, the subsidized medical benefits are considered “double-trigger” payments, which

 

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  means that both a change in control, such as the merger, and another event (i.e., a qualifying termination of employment) must occur prior to the awards becoming fully vested.
(4)

Mr. Dougherty ceased service with the company at the end of second quarter of 2023 and as such will receive no compensation or increase or acceleration thereof in connection with the merger.

Securities Ownership of Certain Beneficial Owners and Management

To Crestwood’s knowledge, the following tables set forth certain information regarding the beneficial ownership of Crestwood common units and Crestwood preferred units as of the close of business on September 8, 2023 (except as noted in the footnotes below) and with respect to: (1) each person known by Crestwood to beneficially own 5% or more of the outstanding Crestwood common units and Crestwood preferred units; (2) each member of the Crestwood board of directors; (3) each named executive officer of Crestwood; and (4) the members of the Crestwood board of directors and Crestwood’s current executive officers as a group.

Principal Unitholders

The following table contains information regarding the only persons Crestwood knows of that beneficially own more than 5% of outstanding Crestwood common units or Crestwood preferred units as of September 8, 2023 (except as noted below). Percentage of class amounts are based on 105,107,291 Crestwood common units and 71,257,445 Crestwood preferred units outstanding as of September 8, 2023. Percentage of all outstanding voting unit amounts is based on 112,233,036 outstanding Crestwood voting units, which, as of September 8, 2023, is the sum of (i) outstanding Crestwood common units and (ii) 7,125,745 Crestwood common units underlying the Crestwood preferred units, on an as-converted basis.

 

Name and Address

   Number of
Crestwood
common
units
     Percentage of
Outstanding
Crestwood
common unit
    Number of
Crestwood
preferred
units
     Percentage of
Outstanding
Crestwood
preferred
units(1)
    Percentage of
All
Outstanding
Voting
Units(2)
 

ALPS Advisors, Inc.(3)

     12,335,027        11.7                  11.0

FR XIII Crestwood Permian Basin Holdings LLC(4)

     11,257,436        10.7                  10.0

CIBC Private Wealth Group, LLC(5)

                  9,755,026        13.7     *  

 

*

Less than one percent.

(1)

Each preferred unitholder is entitled to vote on a 1-for-10 as converted basis with every ten preferred units entitled to one vote.

(2)

Percentage of all outstanding voting unit amounts reflects the sum of (i) outstanding Crestwood common units and (ii) the number of Crestwood common units underlying the Crestwood preferred units, on an as-converted basis.

(3)

Based on Schedule 13G filed by ALPS Advisors, Inc. on February 13, 2023. The address of ALPS Advisors, Inc. is 1290 Broadway, Suite 1000, Denver, CO 80203.

(4)

Based on Schedule 13D filed by FR XIII Crestwood Permian Basin Holdings LLC on September 19, 2022. The address of FR XIII Crestwood Permian Basin Holdings LLC is 262 Harbor Drive, Third Floor, Suite 3100, Stamford, CT 06902.

(5)

Based on Schedule 13G filed by CIBC Private Wealth Group, LLC. on January 10, 2023. The address of CIBC Private Wealth Group is 181 West Madison Street, Chicago, IL 60602.

Unit Ownership of Directors and Executive Officers

The following table sets forth, as of September 8, 2023, the beneficial ownership of Crestwood common units by:

 

   

each of Crestwood’s directors;

 

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each of Crestwood’s named executive officers; and

 

   

all of Crestwood’s directors and executive officers as a group.

None of Crestwood’s directors or executive officers beneficially owns any Crestwood preferred units.

 

Name and Address(1)

   Number of
Crestwood
common
units(2)
     Percentage
of
Outstanding
Crestwood
common
unit
    Number
of
Crestwood
preferred
units
     Percentage
of
Outstanding
Crestwood
preferred
units
     Percentage
of All
Outstanding
Voting
Units(3)
 

Diaco Aviki

     124,283        *       —          —          *  

John Black

     85,979        *       —          —          *  

Steven M. Dougherty(4)

     273,302        *       —          —          *  

Warren H. Gfeller

     65,964        *       —          —          *  

Robert T. Halpin

     550,839        *       —          —          *  

Janeen S. Judah

     21,879        *       —          —          *  

Joel C. Lambert

     346,024        *       —          —          *  

David Lumpkins

     55,571        *       —          —          *  

Angela A. Minas

     8,186        *       —          —          *  

William H. Moore

     238,534        *       —          —          *  

Robert G. Phillips

     1,166,169        1.1     —          —          1.0

Gary D. Reaves

     8,065        *       —          —          *  

John J. Sherman

     3,245,463        3.1     —          —          2.9

Frances M. Vallejo

     13,981        *       —          —          *  

Clay C. Williams

     8,186        *       —          —          *  

Directors and executive officers as a group (15 persons)(5)

     5,965,970        5.7     —          —          5.3

 

*

Less than one percent.

(1)

The contact address for all beneficial owners in this table is 811 Main Street, Suite 3400, Houston, Texas 77002.

(2)

Excludes 425,087 unvested performance phantom units granted to Crestwood’s executive officers pursuant to the Crestwood Equity Partners LP Long Term Incentive Plan.

(3)

Percentage of all outstanding voting unit amounts reflects the sum of (i) outstanding Crestwood common units and (ii) the number of Crestwood common units underlying the Crestwood preferred units, on an as-converted basis.

(4)

Mr. Dougherty resigned from his position as Executive Vice President and Chief Accounting Officer, effective June 30, 2023.

(5)

Includes 26,847 Crestwood common units held by Jeff Cathey, Crestwood’s Senior Vice President, Controller and principal accounting officer.

Merger Expenses, Fees and Costs

All fees, costs and expenses incurred by Energy Transfer and Crestwood in connection with the merger will be paid by the party incurring those fees, costs or expenses, whether or not the merger is completed, except that the fees and expenses incurred in connection with the printing, filing and mailing of this document (including applicable SEC filing fees) and filing fees payable under the HSR Act will be borne by Energy Transfer.

In the event of a termination of the merger agreement under certain circumstances, Crestwood may be required to pay Energy Transfer a breakup fee of $96.0  million. See “The Merger Agreement—Breakup Fee.”

Expected Timing of the Merger

Energy Transfer and Crestwood currently expect to complete the merger in the fourth quarter of 2023, subject to the receipt of required Crestwood unitholder approval and regulatory approvals and the satisfaction or

 

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waiver of the other conditions to completion of the merger. Because many of the conditions to completion of the merger are beyond the control of Energy Transfer and Crestwood, the exact timing for completion of the merger cannot be predicted with any degree of certainty.

No Energy Transfer Unitholder Approval

Energy Transfer unitholders are not required to approve the merger agreement or the merger or the issuance of ET common units in connection with the merger.

Accounting Treatment of the Transactions

In accordance with accounting principles generally accepted in the United States and in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 805-Business Combinations, Energy Transfer will account for the merger as an acquisition of a business.

Regulatory Approvals

The following is a summary of the material regulatory requirements for completion of the transactions.

Antitrust. Under the HSR Act, and related rules, certain transactions, including the merger, may not be completed until notifications have been given and information furnished to the Antitrust Division and the FTC and all statutory waiting period requirements have been satisfied. Energy Transfer and Crestwood each filed the required notification and report forms under the HSR Act on August 25, 2023.

At any time before or after the effective time of the merger, the Antitrust Division, the FTC antitrust authorities could take action under the U.S. antitrust laws, including seeking to prevent the merger, to rescind the merger or to conditionally approve the merger upon the divestiture of assets of Energy Transfer or Crestwood or subject to other remedies. In addition, U.S. state attorneys general could take action under the antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the merger or permitting completion subject to regulatory concessions or conditions. Private parties may also seek to take legal action under the antitrust laws under some circumstances. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

General. Pursuant to the terms of the merger agreement, Energy Transfer and Crestwood have agreed to use their respective reasonable best efforts to take, or cause their subsidiaries to take, all actions necessary, proper or advisable to obtain all regulatory approvals required to consummate the merger.

Pursuant to the merger agreement, Energy Transfer has agreed to take, or cause to be taken, any and all steps and to make, or cause to be made, any and all undertakings necessary to avoid or eliminate each and every impediment to consummation of the transactions contemplated by the merger agreement under regulatory laws (as defined in the merger agreement), including but not limited to defending through litigation on the merits any claim asserted in court by any party in order to avoid entry of, or to have vacated or terminated, any decree, order or judgement (whether temporary, preliminary or permanent) that would prevent the closing of the merger from occurring no later than the End Date (as defined in the merger agreement), provided, however, that Energy Transfer will not be required to, nor will it be required to agree or consent to allow Crestwood to (and Crestwood will not, without Energy Transfer’s prior written consent) (a) sell, divest, license, transfer or otherwise dispose of any businesses, assets, equity interest, product lines, or properties of any person, (b) create, terminate, modify or amend any agreements, relationship, rights or obligations of any person, or (c) accept any restriction on its freedom of action after closing the merger.

 

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Exchange of Units

Equiniti Trust Company, LLC will serve as the exchange agent for purposes of issuing the common unit merger consideration and preferred consideration.

Crestwood Common Units

As soon as reasonably practicable after the effective time (and not later than the 5th business day following the effective time), the exchange agent will mail to each holder of Crestwood common units which at the effective time were converted into the right to receive the common unit merger consideration, (i) a letter of transmittal and (ii) instructions for use in effecting the surrender of the Crestwood common units in exchange for ET common units (which will be issued in book-entry form) and cash in lieu of any fractional ET common units. Such holders will be paid the common unit merger consideration to which they are entitled upon the surrender to the exchange agent of such Crestwood common units and a duly completed and validly executed letter of transmittal and any other documents required by the exchange agent. No interest will be paid or will accrue on any cash amounts received as common unit merger consideration and preferred consideration or in lieu of any fractional ET common units.

Crestwood Preferred Units

Energy Transfer will prepare and direct the exchange agent to mail, by the Mailing Date, a Preferred Election Form to each record holder of Crestwood preferred units as of the fifth business day prior to the Mailing Date. The Preferred Election Form will also include other instructions and provisions that Energy Transfer and Crestwood agree are necessary or useful for effecting the surrender of the Crestwood preferred units in exchange for the elected form of consideration. Unless the Crestwood preferred unitholders desire to make the default election, Crestwood preferred unitholders should return their completed Preferred Election Form to the exchange agent by the Election Deadline. Energy Transfer and Crestwood will cooperate to issue a joint press release announcing the Election Deadline not more than 15 business days before, and at least five business days prior to, the Election Deadline.

If you are a Crestwood preferred unitholder and you tender your Crestwood preferred units to make an election, you will not be able to sell those Crestwood preferred units, unless you revoke your election prior to the Election Deadline.

Promptly after the effective time (and not later than the 5th business day following the effective time), the exchange agent will mail to each Crestwood preferred unitholder (other than the holders which have properly completed, and not revoked, Preferred Election Forms) (i) a letter of transmittal and (ii) instructions for use in effecting the surrender of the Crestwood preferred units in exchange for new ET preferred units (which will be issued in book-entry form). Such holders will be issued the new ET preferred units to which they are entitled upon the surrender to the exchange agent of such Crestwood preferred units and a duly completed and validly executed letter of transmittal and any other documents required by the exchange agent.

Any Crestwood preferred unitholder may (i) change such holder’s election with respect to the Crestwood preferred units by written notice received by the exchange agent prior to the Election Deadline, accompanied by a properly completed and signed revised Preferred Election Form, or (ii) revoke such holder’s election by written notice received by the exchange agent prior to the Election Deadline or by withdrawal prior to the Election Deadline of such holder’s certificates, or of the guarantee of delivery of such certificates, previously deposited with the exchange agent. All Preferred Election Forms shall automatically be revoked if the exchange agent is notified in writing by Crestwood or Energy Transfer that the merger has been abandoned and that the merger agreement has been terminated. If a Preferred Election Form is revoked, the certificate(s) (or guarantees of delivery, as appropriate), if any, for the Crestwood preferred units to which such Preferred Election Form relates shall be promptly returned to the Crestwood preferred unitholder submitting the same to the exchange agent.

 

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Distributions; Payment of Common Unit Merger Consideration and Preferred Consideration; Withholding

No distributions declared or made with respect to ET common units or new ET preferred units with a record date after the effective time will be paid to the holder of any unsurrendered Crestwood common units or Crestwood preferred units with respect to the ET common units or new ET preferred units represented by such units, and no cash payment in lieu of fractional ET common units will be paid to any such holder, until such Crestwood common units or Crestwood preferred units, as applicable, have been surrendered in accordance with the terms of the merger agreement. Subject to applicable laws, following surrender of any such Crestwood common units or Crestwood preferred units the record holders of such units will be paid, without interest, (i) promptly after such surrender, the number of whole ET common units or new ET preferred units to which such holder is entitled, payment by cash or check of the amount of cash merger consideration to which such holder is entitled, together with any cash payable in lieu of fractional ET common units to which such holder is entitled, the amount of distributions with a record date after the effective time theretofore paid with respect to such whole ET common units or new ET preferred units and accrued and unpaid distributions through the effective date of conversion or the date of redemption, as applicable, for any Crestwood preferred units converted into Crestwood common units or redeemed and (ii) at the appropriate payment date, the amount of distributions with a record date after the effective time and a payment date subsequent to the surrender of such Crestwood common units or Crestwood preferred units payable with respect to such whole ET common units or new ET preferred units.

All common unit merger consideration and preferred consideration issued upon the surrender for exchange of Crestwood common units or Crestwood preferred units in accordance with the terms of the merger agreement and any cash paid in lieu of fractional ET common units or as distributions pursuant to the merger agreement will be deemed to have been issued (or paid) in full satisfaction of all rights pertaining to such Crestwood common units or Crestwood preferred units. After the effective time, the unit transfer books of Crestwood will be closed, and there will be no further registration of transfers on the unit transfer books of Crestwood common units or Crestwood preferred units. If, after the effective time, Crestwood common units or Crestwood preferred units are presented to the Surviving Entity or the exchange agent for any reason, they will be cancelled and exchanged as provided in the merger agreement. If any Crestwood common units or Crestwood preferred units have been lost, stolen or destroyed, the exchange agent will issue the common unit merger consideration or preferred consideration to be paid with respect to such units, upon the making of an affidavit of the fact by the person claiming their Crestwood common units or Crestwood preferred units to be lost, stolen or destroyed and, if required by Energy Transfer, the posting of a bond, in such reasonable amount as Energy Transfer determines, as indemnity against any claim that many be made against it with respect to such claimed lost stolen or destroyed units.

Each of Energy Transfer, Merger Sub and the exchange agent will be entitled to deduct and withhold from the common unit merger consideration and the preferred consideration otherwise payable to any holder of units, such amounts as are required to be withheld or deducted under the Code, or any tax law with respect to the making of such payment. To the extent that amounts are withheld and paid over to the applicable governmental entity, such withheld or deducted amounts will be treated as having been paid to the holder of the Crestwood common units or Crestwood preferred units in respect of which such deduction and withholding were made.

One year after the effective time, any portion of the exchange fund that remains undistributed to former Crestwood unitholders will be delivered to Energy Transfer and any Crestwood common unitholders or Crestwood preferred units who have not surrendered such units to the exchange agent in compliance with the merger agreement may thereafter look only to Energy Transfer for payment of their claim for the applicable common unit merger consideration or preferred consideration, any cash in lieu of fractional ET common units, and any distributions payable pursuant to the merger agreement.

 

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Listing of ET Common Units and New ET Preferred Units Issued in the Transactions; Delisting and Deregistration of Crestwood Common Units and Crestwood Preferred Units After the Transactions

It is a condition to the completion of the transactions that the ET common units and new ET preferred units deliverable to the Crestwood unitholders as contemplated by the merger agreement will have been approved for listing (subject, if applicable, to official notice of issuance) for trading on the NYSE. Although the merger agreement requires that new ET preferred units issued in connection with the merger be listed on the NYSE, there can be no assurance that such new ET preferred units will continue to be listed in the future. Upon completion of the merger, the Crestwood common units and Crestwood preferred units will cease to be listed on the NYSE and will subsequently be deregistered under the Exchange Act.

Litigation Related to the Merger

Energy Transfer and Crestwood may be subject to class action lawsuits relating to the merger, which could result in an injunction preventing the completion of the merger, substantial costs to Energy Transfer and Crestwood and/or materially adversely affect their business, financial condition and operating results. As of September 8, 2023, Crestwood and Energy Transfer are unaware of any securities class action lawsuits or derivative lawsuits having been filed in connection with the merger. See “Risk Factors” for additional information regarding any such potential litigation.

 

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THE MERGER AGREEMENT

The following section summarizes material provisions of the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. This summary is subject to, and qualified in its entirety by reference to, the merger agreement, which is attached as Annex A to this document and is incorporated by reference herein. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in this document. You are urged to read the merger agreement carefully and in its entirety before making any decisions regarding the merger.

The merger agreement summary is included in this document only to provide you with information regarding the terms and conditions of the merger agreement, and not to provide any other factual information about Energy Transfer or Crestwood or their respective subsidiaries, affiliates or businesses. Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read together with the information provided elsewhere in this document and in the documents incorporated by reference herein. See “Where You Can Find More Information.”

The representations, warranties and covenants contained in the merger agreement and described in this document were made only for purposes of the merger agreement and as of specific dates and may be subject to more recent developments, were made solely for the benefit of the other parties to the merger agreement and may be subject to limitations agreed upon by the contracting parties, including being qualified by reference to confidential disclosures which may modify, qualify or create exceptions to the representations and warranties, for the purposes of allocating risk between the parties to the merger agreement instead of establishing these matters as facts, and may apply standards of materiality in a way that is different from what may be viewed as material by you or other investors. The representations and warranties contained in the merger agreement do not survive the effective time of the merger. Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of the merger agreement. Energy Transfer and Crestwood will provide additional disclosure in their filings with the SEC, to the extent that they are aware of the existence of any material facts that are required to be disclosed under federal securities laws and that might otherwise contradict the terms and information contained in the merger agreement and will update such disclosure as required by federal securities laws.

The Merger

The merger agreement, by and among Energy Transfer, Merger Sub, Crestwood and, solely for the purposes of Sections 2.1(a), 2.1(b), 2.1(c) and 5.21 thereof, ET GP, provides for the merger of Crestwood with and into Merger Sub, with Merger Sub continuing as the surviving entity and a wholly owned subsidiary of Energy Transfer. The Merger Sub organizational documents immediately prior to the effective time of the merger will be the Surviving Entity’s organizational documents after the merger unless and until such are amended following the merger.

Merger Closing and Effective Time

The closing of the merger will be on the second business day after the satisfaction or waiver of the conditions to closing, which are described in the section titled “—Conditions to the Merger” unless Energy Transfer and Crestwood agree in writing to a different date. The merger will be effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware or at such later time as the parties agree upon and is specified in the certificate of merger in accordance with the Delaware Act and the Delaware Limited Liability Company Act (the “Delaware LLC Act” and, together with the Delaware Act, “the Delaware Acts”) (the “effective time”).

 

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Officers

Energy Transfer will be the sole member of the Surviving Entity following the effective time. Certain directors and officers of Energy Transfer will be the initial officers of the Surviving Entity following the effective time and will hold their respective positions until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

Common Unit Merger Consideration and Preferred Consideration

Common Unit Merger Consideration and Preferred Consideration

At the effective time, each Crestwood common unit outstanding immediately prior to the effective time (other than Excluded Units (as defined in the merger agreement)) will be cancelled and converted into the right to receive 2.07 ET common units and cash in lieu of any fractional ET common units.

At the effective time, each Crestwood Class A unit issued and outstanding immediately prior to the effective time will be cancelled, converted into and will thereafter represent the right to receive 1.828 Energy Transfer Class B units.

At the effective time, each Crestwood preferred unit outstanding immediately prior to the effective time will, at the election of the Crestwood preferred unitholder, in accordance with the Crestwood Partnership Agreement, (i) convert into Crestwood common units, at the then-applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time, (ii) convert into new ET preferred units or (iii) be redeemed in exchange for cash or Crestwood common units, at the sole discretion of Crestwood GP, at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $         per Crestwood preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption.

Crestwood preferred unitholders that receive Crestwood common units pursuant to the foregoing clauses (i) or (iii) will be entitled to receive the common unit merger consideration at the effective time. If no election is made by a holder of Crestwood preferred units, such holder will be deemed to have elected to receive new ET preferred units. Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have elected to have such Crestwood preferred units redeemed pursuant to a Redemption Election as described in clause (iii) above.

Preferred Election Procedures

Prior to the effective time, each Crestwood preferred unitholder will have the right to submit a Preferred Election Form specifying the number of Crestwood preferred units held by such Crestwood preferred unitholder that such person desires to:

 

   

convert to Crestwood common units at the then applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement or amended Crestwood Partnership Agreement, as applicable, currently one Crestwood common unit for 10 Crestwood preferred units) (a “Conversion Election”);

 

   

convert to new ET preferred units; or

 

   

have redeemed in exchange for cash or Crestwood Common Units, at the sole discretion of Crestwood GP, at a price of (x) $9.218573 per Crestwood preferred unit or (y) if the requisite consents are obtained in connection with the Preferred Consent Solicitation, $         per Crestwood preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption.

Crestwood has agreed to cause Crestwood GP to elect to pay cash for any Crestwood preferred units whose holders have validly made a Redemption Election.

 

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Energy Transfer will prepare and direct the exchange agent to mail, by the Mailing Date, a Preferred Election Form (in a form and substance reasonably satisfactory to Crestwood) to each record holder of Crestwood preferred units as of the fifth business day prior to the Mailing Date. The Preferred Election Form will also include other instructions and provisions that Energy Transfer and Crestwood agree are necessary or useful for effecting the surrender of the Crestwood preferred units in exchange for the elected form of consideration. Crestwood preferred unitholders should return their completed Preferred Election Form to the exchange agent by the Election Deadline. Energy Transfer and Crestwood will cooperate to issue a joint press release specifying the date of the Election Deadline not more than 15 business days before, and at least five business days prior to, the Election Deadline.

If a Crestwood preferred unitholder wishes to elect the type of consideration that Crestwood preferred unitholder will receive in the merger, that Crestwood preferred unitholder should carefully review and follow the instructions that will be set forth in the Preferred Election Form. Crestwood preferred unitholders who hold their Crestwood preferred units in “street name” or through a bank, broker or other nominee should follow the instructions of the bank, broker or other nominee for making an election with respect to those Crestwood preferred units. Crestwood preferred units as to which the holder has not made a valid election prior to the Election Deadline will be deemed to have made the default election.

To make a valid election, each Crestwood preferred unitholder must submit a properly completed Preferred Election Form, accompanied by duly executed transmittal materials included in the Preferred Election Form, together with Crestwood preferred unit certificates or a properly completed guarantee of delivery (except with respect to book-entry units, in which case you should follow the instructions set forth in the election form) to the exchange agent prior to the Election Deadline in accordance with the instructions on the Preferred Election form.

A Preferred Election Form will be properly completed only if accompanied by Crestwood preferred unit certificates for the Crestwood preferred units to which such election form relates (or book-entry transfer of uncertificated units) representing all Crestwood preferred units covered by the election form (or customary affidavits and indemnification regarding the loss or destruction of the certificates, as will be described in the election form). If a Crestwood preferred unitholder cannot deliver the Crestwood preferred unit certificates to the exchange agent by the Election Deadline, that unitholder may deliver a notice of guaranteed delivery promising to deliver the certificates, as will be described in the Preferred Election Form, so long as the actual certificates are in fact delivered to the exchange agent within five business days after the execution of the guarantee of delivery.

Generally, an election may be changed, but only by written notice received by the exchange agent prior to the Election Deadline accompanied by a properly completed and signed revised Preferred Election Form. A Crestwood preferred unitholder may also revoke that Crestwood preferred unitholder’s election by either submitting a written notice to the exchange agent or withdrawing the certificates representing the Crestwood preferred units covered by the Preferred Election Form, in each case, prior to the Election Deadline. If an election is revoked, or the merger agreement is terminated, and any certificates (or guarantees of delivery, as applicable) have been transmitted to the exchange agent, the exchange agent will promptly return those certificates (or guarantees of delivery, as applicable) to the Crestwood preferred unitholder who submitted those documents.

Once Crestwood preferred unitholders have tendered their Crestwood preferred unit certificates to the exchange agent, they may not transfer their Crestwood preferred units represented by those certificates until the merger is completed, unless they revoke their election by written notice to the exchange agent that is received prior to the Election Deadline.

Crestwood preferred unitholders will not be entitled to revoke or change their elections following the Election Deadline. As a result, if a Crestwood preferred unitholder has made one or more elections, that Crestwood preferred unitholder will be unable to revoke those elections or sell the applicable Crestwood preferred units during the interval between the Election Deadline and the date of completion of the merger.

 

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Crestwood preferred units as to which the holder has not made a valid election prior to the Election Deadline, including as a result of revocation, will be deemed to have made a default election. The determination of the exchange agent will be binding as to whether an election has been properly made or revoked. If it is determined by the exchange agent that any purported Conversion Election or Redemption Election was not properly made, the purported election will be deemed to be of no force or effect and the holder making the purported election will be deemed to have made a default election, unless a proper election is subsequently made on a timely basis.

Conditions to the Merger

Conditions to Each Party’s Obligations

Each party’s obligation to complete the merger is subject to the fulfillment or waiver of the following conditions at or prior to the effective time:

 

   

the merger agreement must have been approved by the holders of a majority of the outstanding Crestwood common units and Crestwood preferred units, on an as-converted basis, voting as a single class;

 

   

the absence of any law, statute, ordinance, rule, regulation, judgment, injunction, order or decree by any court or governmental entity of competent jurisdiction which prohibits or prevents the consummation of the merger or any other transaction contemplated by the merger agreement;

 

   

the expiration or termination of all waiting periods (including extensions thereof) applicable to the merger or related transactions under the HSR Act must have occurred;

 

   

the receipt by Energy Transfer of an opinion of Kirkland & Ellis (or, if Kirkland & Ellis is unable or unwilling to render such an opinion, the written opinion of another nationally recognized counsel as may reasonably acceptable to Energy Transfer), dated as of the closing date, to the effect that (i) at least 90% of the gross income of Energy Transfer for all of the calendar year that immediately precedes the calendar year that includes the closing date and each calendar quarter of the calendar year that includes the closing date for which the necessary financial information is available is from sources treated as “qualifying income” within the meaning of Section 7704(d) of the Code and (ii) at least 90% of the combined gross income of each of Energy Transfer and Crestwood for all of the calendar year that immediately precedes the calendar year that includes the closing date and each calendar quarter of the calendar year that includes the closing date for which the necessary financial information is available is from sources treated as “qualifying income” within the meaning of Section 7704(d) of the Code;

 

   

the receipt by Crestwood of an opinion of Vinson & Elkins (or, if Vinson & Elkins is unable or unwilling to render such an opinion, the written opinion of another nationally recognized counsel as may reasonably acceptable to Crestwood), dated as of the closing date, to the effect that at least 90% of the gross income of Crestwood for all of the calendar year that immediately precedes the calendar year that includes the closing date and each calendar quarter of the calendar year that includes the closing date for which the necessary financial information is available is from sources treated as “qualifying income” within the meaning of Section 7704(d) of the Code; and

 

   

the registration statement on Form S-4 (of which this document forms a part) must be effective and the absence of any SEC stop order or the initiation or threat of any proceedings seeking a stop order.

Conditions to Crestwood’s Obligations

The obligation of Crestwood to effect the merger is further subject to the fulfillment, or waiver by Crestwood prior to the effective time, of the following conditions:

 

   

the representations and warranties of Energy Transfer and Merger Sub in the merger agreement must be true and correct as of the date of the merger agreement and as of the closing date as though made at

 

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the closing date (without giving effect to any materiality, material adverse effect and similar qualifiers) except where the failure to be true and correct would not, in the aggregate, reasonably be expected to have a material adverse effect on Energy Transfer and Merger Sub, provided that the representations and warranties that speak only as of a particular date or period need only be true and correct as of such date or period, except:

 

   

the representations and warranties of Energy Transfer and Merger Sub regarding the capitalization of Energy Transfer and its subsidiaries must be true and correct except for immaterial inaccuracies both as of the date of the merger agreement and as of the closing date as though made at the closing date, except for immaterial inaccuracies; and

 

   

the representations and warranties of Energy Transfer and Merger Sub regarding the absence of a material adverse effect at Energy Transfer since June 30, 2023 must be true and correct as of the date of the merger agreement and as of the closing date;

 

   

Energy Transfer must have, in all material respects, performed all of its obligations and complied with all covenants required by the merger agreement to be performed or complied with by it prior to the effective time;

 

   

Energy Transfer must have delivered to Crestwood a certificate, dated as of the closing date, certifying to the effect that the two foregoing conditions to closing have been satisfied;

 

   

Crestwood must have received an opinion of Vinson & Elkins (or, if Vinson & Elkins is unable or unwilling to render such an opinion, the written opinion of another nationally recognized counsel as may reasonably acceptable to Crestwood), dated as of the closing date, to the effect that, for U.S. federal income tax purposes, Crestwood should not recognize any income or gain as a result of the merger and no gain or loss should be recognized by Crestwood common unitholders (in their capacity as Crestwood common unitholders) and Crestwood preferred unitholders (in their capacity as Crestwood preferred unitholders) as a result of the merger (in each case, subject to certain exception and limitations set forth in the merger agreement);

 

   

ET units to be issued in the merger must have been approved for listing on the NYSE, subject to official notice of issuance; and

 

   

an Energy Transfer material adverse effect must not have occurred since the date of the merger agreement.

Conditions to Energy Transfer’s Obligations

The obligation of Energy Transfer to effect the merger is further subject to the fulfillment, or waiver by Energy Transfer, at or prior to the effective time, of the following conditions:

 

   

the representations and warranties of Crestwood in the merger agreement must be true and correct as of the date of the merger agreement and as of the closing date as though made at the closing date (without giving effect to any materiality, material adverse effect and similar qualifiers) except where the failure to be true and correct would not, in the aggregate, reasonably be expected to have a material adverse effect on Crestwood, provided that the representations and warranties that speak only as of a particular date or period need only be true and correct as of such date or period, except:

 

   

the representations and warranties of Crestwood regarding the equity interests of Crestwood must be true and correct except for immaterial inaccuracies both as of the date of the merger agreement and as of the closing date as though made at the closing date; and

 

   

the representations and warranties of Crestwood regarding the absence of a material adverse effect at Crestwood since June 30, 2023 must be true and correct as of the date of the merger agreement and as of the closing date;

 

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Crestwood must have performed, in all material respects, all of its obligations and complied with all covenants required by the merger agreement to be performed or complied with prior to the effective time;

 

   

Crestwood must have delivered to Energy Transfer a certificate, dated as of the closing date, certifying to the effect that the two foregoing conditions to closing have been satisfied;

 

   

Energy Transfer shall have received an opinion of Kirkland & Ellis (or, if Kirkland & Ellis is unable or unwilling to render such an opinion, the written opinion of another nationally recognized counsel as may reasonably acceptable to Energy Transfer), dated as of the closing date, to the effect that, for U.S. federal income tax purposes, (i) Energy Transfer should not recognize any income or gain as a result of the merger and (ii) no gain or loss should be recognized by holders of ET common units (in their capacity as holders of ET common units) immediately prior to the merger as a result of the merger (other than any gain or loss resulting from any decrease in partnership liabilities pursuant to Section 752 of the Code); and

 

   

a Crestwood material adverse effect must not have occurred since the date of the merger agreement.

No Dissenters’ or Appraisal Rights

No dissenters’ or appraisal rights are available to Crestwood unitholders with respect to the merger or the other transactions contemplated by the merger agreement.

Representations and Warranties

The merger agreement contains general representations and warranties made by each of Energy Transfer and Merger Sub, on the one hand, and Crestwood on the other, to the other party, regarding aspects of their respective businesses, financial condition and structure, as well as other facts pertinent to the merger. These representations and warranties are in many respects subject to materiality, knowledge and other similar qualifications contained in the merger agreement and expire at the effective time. The representations and warranties of each of Energy Transfer and Merger Sub, on the one hand, and Crestwood on the other, were made solely for the benefit of the other party. In addition, those representations and warranties were intended not as statements of actual fact, but rather as a way of allocating risk between the parties, were modified by the disclosure schedules attached to the merger agreement, were subject to the materiality standard described in the merger agreement (which may differ from what may be viewed as material by you) and were made only as of the date of the merger agreement and the closing date of the merger or another date as is specified in the merger agreement. Information concerning the subject matter of these representations or warranties may have changed since the date of the merger agreement. Energy Transfer and Crestwood will provide additional disclosure in their SEC reports to the extent that they are aware of the existence of any material facts that are required to be disclosed under federal securities laws and that might otherwise contradict the terms and information contained in the merger agreement and will update such disclosure as required by federal securities laws.

Crestwood

Crestwood made a number of representations and warranties to Energy Transfer and Merger Sub, including representations and warranties related to the following matters:

 

   

the organization, qualification to do business and good standing of Crestwood and its subsidiaries;

 

   

the capital structure of Crestwood and its subsidiaries;

 

   

the authority of Crestwood, and the governmental and regulatory approvals necessary, to enter into the merger agreement and consummate the transactions contemplated thereby, and the absence of any loss, or creation of any lien, or violation of the organizational documents of Crestwood and its subsidiaries or any applicable laws resulting from the consummation of the transactions contemplated by the merger agreement;

 

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Crestwood’s and its subsidiaries’ SEC filings and the financial statements contained therein;

 

   

Crestwood’s internal controls over financial reporting and disclosure controls and procedures;

 

   

Crestwood and its subsidiaries’ SEC filings and the financial statements contained therein;

 

   

the absence of undisclosed liabilities for Crestwood and its subsidiaries;

 

   

Crestwood and its subsidiaries’ compliance with laws and permits;

 

   

Crestwood and its subsidiaries’ environmental liabilities and compliance with environmental laws;

 

   

Crestwood and its subsidiaries’ employee benefit plans and other employee benefits matters;

 

   

the conduct of Crestwood and its subsidiaries’ business and the absence of certain adverse changes or events since June 30, 2023;

 

   

litigation, investigations, claims or judgments against Crestwood or its subsidiaries;

 

   

the accuracy of the information supplied by Crestwood and its subsidiaries for this document and the registration statement of which it is a part;

 

   

certain regulatory matters related to Crestwood and its subsidiaries;

 

   

Crestwood and its subsidiaries’ taxes, tax returns and other tax matters;

 

   

certain employment and labor matters related to Crestwood and its subsidiaries;

 

   

Crestwood and its subsidiaries’ intellectual property;

 

   

Crestwood and its subsidiaries’ owned and leased real property and rights-of-way;

 

   

Crestwood and its subsidiaries’ insurance policies;

 

   

the receipt by the Crestwood board of directors of an opinion from Evercore related to the fairness, from a financial point of view, of the exchange ratio to the Crestwood common unitholders;

 

   

Crestwood and its subsidiaries’ material contracts and the absence of a material breach of or material default under such contracts;

 

   

the related party transactions of Crestwood and its subsidiaries;

 

   

investment banker, broker or finder fees in connection with the consummation of the merger;

 

   

the inapplicability of any state’s anti-takeover statute restrictions;

 

   

the absence of any material violations during the past five years of any laws governing export control and economic sanctions by Crestwood and its subsidiaries; and

 

   

the absence of any additional Energy Transfer or Merger Sub representations or warranties beyond those in the merger agreement.

Energy Transfer and Merger Sub

Energy Transfer and Merger Sub each also made a number of representations and warranties to Crestwood, including representations and warranties related to the following matters:

 

   

organization, qualification to do business and good standing of Energy Transfer and its subsidiaries;

 

   

the equity interests of Energy Transfer and capital structure of Merger Sub;

 

   

the authority of Energy Transfer and Merger Sub, and governmental and regulatory approvals necessary, to enter into the merger agreement and consummate the transactions contemplated thereby, and the absence of any loss, or creation of any lien, or violation of the organizational documents of Energy Transfer and its subsidiaries, or any applicable laws resulting from the consummation of the transactions contemplated by the merger agreement;

 

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Energy Transfer and its subsidiaries’ SEC filings and the financial statements contained therein;

 

   

Energy Transfer’s internal controls over financial reporting and disclosure controls and procedures;

 

   

the absence of undisclosed liabilities for Energy Transfer and its subsidiaries;

 

   

Energy Transfer and its subsidiaries’ compliance with laws and permits;

 

   

Energy Transfer’s and its subsidiaries’ environmental liabilities and compliance with environmental laws;

 

   

the conduct of Energy Transfer and its subsidiaries’ business and the absence of certain adverse changes or events since June 30, 2023;

 

   

litigation, investigations, claims or judgments against Energy Transfer or its subsidiaries;

 

   

the accuracy of the information supplied by Energy Transfer or its subsidiaries for this document and the registration statement of which it is a part;

 

   

certain regulatory matters related to Energy Transfer and its subsidiaries;

 

   

Energy Transfer’s taxes and tax returns and other tax matters;

 

   

investment banker, broker or finder fees in connection with the consummation of the merger;

 

   

Energy Transfer’s (and its affiliates’) non-ownership of Crestwood common units;

 

   

the availability to Energy Transfer of sufficient funds to refinance Crestwood’s indebtedness or otherwise satisfy requirements of such obligations; and

 

   

the absence of any additional Crestwood representations or warranties beyond those in the merger agreement.

Definition of Material Adverse Effect

Many of the representations and warranties of Energy Transfer, Merger Sub and Crestwood are qualified by a material adverse effect standard. For purposes of the merger agreement, “material adverse effect,” with respect to either Energy Transfer or Crestwood, is defined to mean an event, change, effect, development or occurrence that has had, or is reasonably likely to have, a material adverse effect on the business, financial condition or continuing results of operations of either (i) Energy Transfer and its subsidiaries, taken as a whole or (ii) Crestwood and its subsidiaries, taken as a whole, as the case may be, in either case, other than any event, change, effect, development or occurrence:

 

   

in or generally affecting the economy, the financial or securities markets, or political, legislative or regulatory conditions, in the United States or elsewhere in the world, including any changes in supply, demand, currency exchange rates, tariff policy, monetary policy or inflation (so long as it does not disproportionately affect the applicable party relative to similarly situated industry companies); or

 

   

resulting from or arising out of:

 

  (A)

changes or developments in the industries in which the applicable party or its subsidiaries conduct their business;

 

  (B)

changes or developments in prices for oil, natural gas or other commodities or for the applicable party’s raw material inputs and end products, including general market prices and regulatory changes generally affecting the industries in which the applicable party and its subsidiaries operate;

 

  (C)

the negotiation, execution, announcement, pendency or the existence of, or compliance with or performance under the merger agreement or the transactions contemplated thereby (including its impact on the relationships of the applicable party and its subsidiaries with employees, labor unions, customers, suppliers or partners, and including any lawsuit, action or other proceeding with respect to the merger or the other transactions contemplated by the merger agreement);

 

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  (D)

taking of any action required by the merger agreement or at the written request of (i) Energy Transfer or Merger Sub, in the case of Crestwood, or (ii) Crestwood, in the case of Energy Transfer;

 

  (E)

adoption, implementation, promulgation, repeal, modification, reinterpretation or proposal of any rule, regulation, ordinance, order, protocol or any other law of or by governmental entity, or market administrator;

 

  (F)

changes in GAAP or accounting standards or interpretations thereof;

 

  (G)

earthquakes, hurricanes, tsunamis, tornadoes, floods, mudslides, wildfires, epidemics, pandemics (including SARS CoV-2), or any weather-related or meteorological events or other force majeure event or natural disasters or outbreak or escalation of hostilities or acts of war or terrorism, sabotage, civil disobedience, cyber-attack or any escalation or general worsening of the foregoing;

  (H)

failure by the applicable party to meet any internal or external projections or forecasts or estimates, milestones or budgets or financial or operating predictions of revenues, earnings or other financial or operating metrics for any period (although this exclusion does not affect a determination that the underlying event, change, effect, development or occurrence resulted in, or contributed to, a material adverse effect); or

 

  (I)

any changes in the unit price or trading volume of the equity interests of Energy Transfer or Crestwood, as the case may be, or in their respective credit ratings (although this exclusion does not affect a determination that the underlying event, change, effect, development or occurrence resulted in, or contributed to, a material adverse effect);

except, in each case with respect to subclauses (A) and (B) and (E) through (G) above, to the extent disproportionately affecting Energy Transfer or Crestwood, as the case may be, and its subsidiaries, taken as a whole, relative to other similarly situated companies in the industries in which such party and its subsidiaries operate.

Conduct of Business Pending the Merger

Crestwood

Crestwood has agreed that, until the earlier of the termination of the merger agreement or the effective time, except as required by law or any applicable stock exchange or regulatory authority, as may be consented to in writing by Energy Transfer (which consent will not be unreasonably withheld, delayed or conditioned), as may be contemplated or required by the merger agreement or, to the extent action is reasonably taken or omitted in response to an emergency or as set forth on Crestwood’s disclosure schedule to the merger agreement, Crestwood will, and will cause its subsidiaries to, use their commercially reasonable efforts to conduct their businesses in the ordinary course and preserve substantially intact their present lines of business, maintain its rights and franchises and preserve its relationships with customers and suppliers.

Crestwood has further agreed that, on behalf of itself and its subsidiaries, until the earlier of the termination of the merger agreement or the effective time, except as required by law or any applicable stock exchange or regulatory authority, as may be agreed in writing by Energy Transfer (which consent will not be unreasonably withheld, delayed or conditioned), as may be contemplated or required by the merger agreement or as set forth on Crestwood’s disclosure schedule, Crestwood:

 

   

will not adopt any amendment to its certificate of limited partnership or partnership agreement, and will not permit its subsidiaries to adopt any amendments to their respective certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement, certificate of incorporation or bylaws or similar organizational documents;

 

   

will not permit its subsidiaries to issue, sell, pledge, dispose of, encumber, split, combine or reclassify or authorize the issuance, sale, pledge disposition, encumbrance split, combination or reclassification

 

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of any of its partnership interests, limited liability company interests or other equity interests of Crestwood or its subsidiaries or any securities convertible into or exchangeable for any such partnership interests, limited liability company interests or other equity interests, or any rights, warrants or options to acquire any such partnership interests, limited liability company interests, equity interests or convertible or exchangeable securities or take any action to cause to be exercisable any otherwise unexercisable option under any existing benefit plans of Crestwood, other than issuances of Crestwood common units or common units under the Niobrara LLC Agreement (as defined in the merger agreement), issuances of Crestwood common units in respect of any settlement of any of the equity awards outstanding on the date of the merger agreement in accordance with their current terms, sales of Crestwood common units pursuant to its Employee Unit Purchase Plan in accordance with the merger agreement or for transactions among Crestwood and its subsidiaries or among Crestwood’s subsidiaries;

 

   

will not, and will not permit its subsidiaries to, authorize or pay any dividend or make any distribution with respect to outstanding partnership interests, limited liability company interests or other equity interests (whether in cash, assets, stock or other securities of Crestwood or its subsidiaries), except (1) by a subsidiary only to Crestwood or its subsidiaries in the ordinary course of business, (2) those required under the organizational documents of the entity in effect on the date of the merger agreement, (3) regular quarterly cash distributions with customary record and payment dates on Crestwood common units, not in excess of $0.655 per Crestwood common unit per quarter (4) dividends or distributions paid or settled in connection with the exercise or settlement of any equity award of Crestwood outstanding on the date hereof in accordance with their terms in effect as of the date hereof, (5) the payment of a Special Distribution if Crestwood and Energy Transfer mutually agree that closing is reasonably expected to occur before the ex-dividend date of Energy Transfer’s regular quarterly distribution for the quarter ending December 31, 2023, (6) regular quarterly cash distributions with customary record and payment dates on the Crestwood preferred units, and the payment of any accrued and unpaid distributions in respect of the Crestwood preferred units in connection with the payment of the Special Distribution, in each case as required by and in accordance with the terms of the Crestwood Partnership Agreement and (7) regular quarterly cash distributions on the Series A Preferred Units under the Niobrara LLC Agreement (as defined in the merger agreement) and, in the case of clauses (6) and (7), in the amounts set forth in Crestwood’s disclosure schedule;

 

   

will not, and will not permit its subsidiaries to, adopt a plan of complete or partial liquidation, dissolution, merger, or any reorganization, or enter into a letter of intent or agreement in principle with respect thereto, other than the merger, or any mergers, consolidations, restructurings or reorganizations solely among Crestwood and its wholly owned subsidiaries or among its wholly owned subsidiaries;

 

   

will not, and will not permit its subsidiaries to, make any acquisition or make any loans, advances or capital contributions to, or investments in excess of $35 million in the aggregate, except (1) as contemplated by Crestwood’s 2023 capital growth plan or Crestwood’s 2024 capital growth plan, (2) among Crestwood and its wholly owned subsidiaries or among its wholly owned subsidiaries, (3) purchases or acquisitions of inventory, commodities and produced hydrocarbons, crude oil and refined products in the ordinary course of business (4) capital contributions not to exceed $260 million to redeem those certain Series A Preferred Units (as defined in the merger agreement) in accordance with the terms of the Niobrara LLC Agreement (as defined in the merger agreement) or (5) capital contributions made in response to any emergency; provided, however, that, in each case, would not be expected to prevent, materially impede or materially delay the consummation of the merger;

 

   

will not, and will not permit its subsidiaries to, sell, lease, license, transfer, exchange or swap or dispose of any properties or non-cash assets with a value of more than $35 million, except (1) of obsolete or worthless equipment, (2) of inventory, commodities and produced hydrocarbons, crude oil and refined products in the ordinary course of business or (3) among Crestwood and its wholly owned subsidiaries or among its wholly owned subsidiaries;

 

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except as required by any Crestwood benefit plan as in effect on the date of the merger agreement and listed in Crestwood’s disclosure schedule, will not, and will not permit its subsidiaries to, (1) increase the compensation or benefits payable or provided to any directors, officers, employees or other individual service providers of Crestwood, (2) enter into, adopt, terminate or amend any employment, change of control, severance or retention agreement, special pay, consulting, non-competition or similar agreement or arrangement with any director, officer, employee, or other individual service provider of Crestwood or any of its subsidiaries, (3) establish, adopt, enter into, terminate or amend or modify Crestwood benefit plan, except for annual renewals of group welfare plans in the ordinary course of business consistent with past practice that would not result in material additional or increased costs, (4) enter into, terminate or amend any collective bargaining agreement, (5) hire or terminate (other than for cause) the employment or engagement of any employee or individual service provider of Crestwood or any of its subsidiaries with an annual base compensation in excess of $175,000, (6) grant, announce or authorize the grant of any Crestwood equity awards, (7) enter into or make any loans or advances to any of its officers, directors, employees, agents, or consultants (other than those for travel or reasonable business expenses) or (8) implement any employee layoffs, plant closings, reductions in force, furloughs, temporary layoffs, salary or wage reductions, work schedule changes or other such actions that trigger obligations under the Worker Adjustment and Retraining Notification Act of 1998, as amended;

 

   

will not, and will not permit its subsidiaries to, materially change financial accounting policies or procedures or any of its methods of reporting material items for financial accounting purposes, except as required by GAAP, Federal Energy Regulatory Commission (“FERC”) regulations, SEC rule or policy or law;

 

   

will not, and will not permit its subsidiaries to purchase, redeem or otherwise acquire any shares of capital stock of any of them or any rights, warrants or options to acquire any such shares, except for (i) transactions among Crestwood and its subsidiaries or among its subsidiaries or (ii) a Special Partial Redemption in accordance with the terms of the Niobrara LLC Agreement (as defined in the merger agreement);

 

   

will not, and will not permit its subsidiaries to become liable for any indebtedness for borrowed money or any guarantee of such indebtedness, except for (1) any indebtedness not pursuant to the Crestwood Credit Agreement incurred in the ordinary course of business, (2) any indebtedness among Crestwood and its wholly owned subsidiaries or among its wholly owned subsidiaries, (3) any indebtedness incurred to replace, renew, extend, refinance or refund any existing indebtedness on substantially the same or more favorable terms and such replacement, renewal, extension, refinancing or refunding of such existing indebtedness does not exceed the existing principal amount of such existing indebtedness being replaced, renewed, extended, refinanced or refunded plus fees, expenses (including any make-whole and repurchase premiums), accrued and unpaid interest in connection therewith, (4) any guarantees by Crestwood of indebtedness of its subsidiaries or guarantees by its subsidiaries of indebtedness of Crestwood or any Crestwood subsidiary, which indebtedness is incurred in compliance with the merger agreement, (5) any indebtedness incurred in response to any emergency, (6) any indebtedness incurred in connection with a Special Partial Redemption (as defined in the merger agreement) not to exceed $260 million, and (7) any indebtedness incurred pursuant to Crestwood’s credit agreement, not to exceed $100 million, excluding, for the avoidance of a doubt any indebtedness incurred in accordance with the foregoing clauses (1) through (6); in each case, provided that such indebtedness does not impose or result in any additional restrictions or limitations that would be material to Crestwood and its subsidiaries, or, following the closing of the merger, Energy Transfer and its subsidiaries, other than any obligation to make payments on such indebtedness and other than any restrictions or limitations to which Crestwood or any subsidiary is subject as of the date of the merger agreement;

 

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other than in the ordinary course of business, will not, and will not permit its subsidiaries to, modify, amend or terminate, or waive any rights under any material contract or permit, in a manner or with an effect that is materially adverse to Crestwood and its subsidiaries, taken as a whole;

 

   

other than agreements, arrangements or contracts made in the ordinary course of business, on terms no less favorable to Crestwood and its subsidiaries than those generally being provided to or available from unrelated third parties, and in each case involving aggregate payments of less than $50 million, will not, and will not permit any of its subsidiaries to, enter into any agreement, arrangement, contract or other transaction with any affiliate;

 

   

will not, and will not permit its subsidiaries to, waive, release, assign, settle or compromise any claim, action or proceeding, other than waivers, releases, assignments, settlements or compromises (1) equal to or lesser than the amounts reserved for it on the balance sheet as of June 30, 2023 or (2) that do not exceed $25 million;

 

   

will not (except in the ordinary course of business) (1) change its fiscal year or any material method of tax accounting, (2) make, change or revoke any material tax election, (3) enter into any closing agreement, with respect to, or otherwise settle or compromise, any material tax liability, (4) file any material amended tax return, (5) surrender a claim for a material refund of taxes, (6) fail to pay any material tax (including estimated tax payments or installments) that becomes due and payable (other than taxes being contested in good faith by appropriate proceedings and for which adequate accruals or reserves have been established);

 

   

will not take any action or fail to take any reasonable action that would reasonably be expected to cause Crestwood or any of its subsidiaries to be treated, for U.S. federal income tax purposes, as a corporation, and will not, and will not permit any of its subsidiaries to, engage in any activity or conduct its business in a manner that would cause less than 90% of the gross income of Crestwood for any calendar quarter since its formation and prior to the effective time to be treated as “qualifying income” within the meaning of Section 7704(d) of the Code;

 

   

for transactions between Crestwood and its subsidiaries or among its subsidiaries, will not, and will not permit its subsidiaries, to prepay, redeem, repurchase, defease, cancel or otherwise acquire any indebtedness or guarantees thereof of Crestwood or any subsidiary, other than at stated maturity, prepayment and repayment of existing indebtedness in connection with any replacement, renewal, extension, refinancing or refund thereof, prepayment and repayment of revolving loans in the ordinary course of business, and any required amortization payments and mandatory prepayments, in each case in accordance with the terms of the instrument governing such indebtedness as in effect on the date of the merger agreement; and

 

   

will not, and will not permit any of its subsidiaries to, agree to take any of the foregoing actions.

Energy Transfer

Energy Transfer has agreed that, until the earlier of the termination of the merger agreement or the effective time, except as required by law or any applicable stock exchange or regulatory authority, as may be consented to in writing by Crestwood (which consent will not be unreasonably withheld, delayed or conditioned), as may be contemplated or required by the merger agreement, or, to the extent action is reasonably taken or omitted in response to an emergency or as set forth on Energy Transfer’s disclosure schedule to the merger agreement, Energy Transfer will, and will cause its subsidiaries to, use commercially reasonable efforts conduct its business in the ordinary course, and to preserve substantially intact their present lines of business, maintain its rights and franchises and preserve its relationships with customers and suppliers.

Energy Transfer has further agreed that, until the earlier of the termination of the merger agreement or the effective time, except as required by law or any applicable stock exchange or regulatory authority, as may be agreed in writing by Crestwood (which consent will not be unreasonably withheld, delayed or conditioned), as

 

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may be contemplated or required by the merger agreement, or as set forth on Energy Transfer’s disclosure schedule, Energy Transfer:

 

   

will not adopt any material amendment to Energy Transfer’s organizational documents or the certificate of formation, limited liability company agreement or similar organizational documents of ET GP;

 

   

subject to certain exceptions set forth in the merger agreement, will not, and will not permit its subsidiaries to, split, combine or reclassify any of their equity interests or other ownership interests or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for units or equity interests, except for any such transaction by a wholly owned subsidiary of Energy Transfer which remains a wholly owned subsidiary after such transaction and issuance of ET Class A units in accordance with Energy Transfer’s organizational documents;

 

   

will not, and will not permit any of its subsidiaries that is not, directly or indirectly, wholly owned by Energy Transfer to, authorize or pay any dividends on or make any distribution with respect to its outstanding partnership interests, limited liability company interests or other equity securities (whether in cash, assets, partnership units, stock or other securities Energy Transfer or its subsidiaries), except for (1) dividends or distributions by any subsidiaries only to Energy Transfer or its subsidiaries in the ordinary course of business, (2) dividends or distributions required under the applicable organizational documents of such entity in effect on the date of the merger agreement, and (3) regular quarterly cash distributions with respect to (i) the ET common units with customary record and payment dates on the ET common units (including increases in the amount of such quarterly cash distributions consistent with public disclosure made by Energy Transfer prior to the date of the merger agreement and excluding any special or one time distributions), (ii) the Energy Transfer Class B units and (iii) the Energy Transfer preferred units as required by terms of the Energy Transfer preferred units;

 

   

will not, and will not permit any of its material subsidiaries to, adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization, other than any restructuring or reorganization solely among Energy Transfer and its subsidiaries or among Energy Transfer’s subsidiaries;

 

   

take any action or fail to take any reasonable action that would reasonably be expected to cause Energy Transfer to be treated, for U.S. federal income tax purposes, as a corporation, and will not, and will not permit any of its Subsidiaries to, engage in any activity or conduct its business in a manner that would cause less than 90% of the gross income of Energy Transfer for any calendar quarter since its formation and prior to the effective time to be treated as “qualifying income” within the meaning of Section 7704(d) of the Code;

 

   

prior to December 31, 2023 (unless Energy Transfer agrees to extend to a later date pursuant to the terms of the merger agreement (See “The Merger Agreement—Termination of the Merger Agreement”)), will not, and will not permit any of its subsidiaries to, acquire, or enter into any agreement to acquire or enter into any joint venture arrangement with respect to any other person or entity in any manner that would reasonably be expected to prevent, materially impede or materially delay the consummation of the merger; and

 

   

will not, and will not permit any of its subsidiaries to, agree to take any of the foregoing actions.

Mutual Access

Until the effective time or the earlier termination of the merger agreement, Energy Transfer and Crestwood agreed to afford the other party and its representatives, reasonable access during normal business hours to its and its subsidiaries’ key employees and properties, contracts, commitments, books and records and any reports, schedules or documents filed or received by it pursuant to law, together with such other existing accounting, financing, operating, environmental and other information as a party may reasonably request. Notwithstanding

 

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the obligations described above, neither Crestwood nor Energy Transfer is required to afford such access if it would unreasonably disrupt the operations of such party or its subsidiaries, would cause a violation of any agreement to which it or its subsidiaries is party, would cause a risk of a loss privilege to such party or its subsidiaries or would violate the law. Neither Crestwood or Energy Transfer or any of their respective representatives are permitted to perform onsite procedures on property of the other party or its subsidiaries without prior written consent. Crestwood and Energy Transfer are required to comply, and cause their respective subsidiaries and representatives to comply, with their respective obligations under the confidentiality agreement, dated May 25, 2023, between Crestwood and Energy Transfer.

Non-Solicitation by Crestwood

Termination of Discussions

Crestwood and Crestwood GP agreed to, immediately following the execution of the merger agreement, cease and terminate any discussions related to any acquisition proposal (as defined below), and to cause its subsidiaries and their respective directors, officers and employees, and to use reasonable best efforts to cause its representatives, to cease and terminate such discussions.

Non-Solicitation Obligations

Subject to certain exceptions summarized below, from the date of the merger agreement until the earlier of the effective time or the termination of the merger agreement, Crestwood and Crestwood GP have agreed that they will not, and they will cause their subsidiaries, and its and their respective officers, directors, employees and representatives not to, directly or indirectly:

 

   

solicit, initiate, seek or knowingly encourage, induce or facilitate any proposal or offer or any inquiries regarding the making or submission of any proposal or offer, including any proposal or offer to Crestwood’s unitholders, that constitutes, or would reasonably be expected to lead to, an acquisition proposal;

 

   

furnish any non-public information regarding Crestwood or any of its subsidiaries, or afford access to the business, properties, books or records of Crestwood or any of its subsidiaries, in connection with or in response to an acquisition proposal or any inquiries regarding an acquisition proposal;

 

   

engage or participate in or otherwise knowingly facilitate any discussions or negotiations with any person (other than Energy Transfer, Merger Sub or their respective directors, officers, employees, affiliates or representatives) with respect to an acquisition proposal;

 

   

approve, endorse or recommend (or publicly propose to approve, endorse or recommend) any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal;

 

   

enter into any letter of intent, term sheet, memorandum of understanding, merger agreement, acquisition agreement, exchange agreement or duly execute any other agreement (whether binding or not) with respect to any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, an acquisition proposal or requiring Crestwood to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the merger agreement;

 

   

unless the Crestwood board of directors, or any committee thereof, concludes in good faith, after consultation with its outside legal counsel, that the failure to take such action would reasonably be expected to be inconsistent with the duties of the Crestwood board of directors under applicable law and the Crestwood Partnership Agreement, amend or grant any waiver, release or modification under, or fail to enforce, any standstill or similar agreement with respect to any of Crestwood or its subsidiaries’ equity securities, or

 

   

resolve, propose or agree to do any of the foregoing.

 

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Exceptions to Non-Solicitation Provision

Notwithstanding its non-solicitation obligations described above, prior to obtaining Crestwood unitholder approval of the merger agreement, Crestwood may furnish non-public information regarding Crestwood or any of its subsidiaries, or afford access to the business, properties, books or records of Crestwood or any of its subsidiaries, and engage and participate in discussions and negotiations in response to an unsolicited, written and bona fide acquisition proposal that the Crestwood board of directors, or any committee thereof, concludes in good faith, after consultation with its financial advisors and outside legal counsel, constitutes or could reasonably be expected to result in a superior offer (as defined below) and (i) such acquisition proposal was received after the date of the merger agreement and did not result from a material breach of Crestwood’s non-solicitation obligations, (ii) Crestwood notifies Energy Transfer with respect to such acquisition proposal in the manner required by the merger agreement and (iii) Crestwood furnishes any non-public information to the maker of the acquisition proposal only pursuant to a confidentiality agreement that is not less restrictive to such person than the confidentiality agreement between Crestwood and Energy Transfer and any such information not previously provided to Energy Transfer will be provided or made available to Energy Transfer on a substantially concurrent timeline.

Crestwood’s non-solicitation obligations described above do not prohibit Crestwood or the Crestwood board of directors from:

 

   

informing any person that Crestwood is a party to the merger agreement and of the non-solicitation restrictions therein; or

 

   

disclosing factual information regarding the business, financial condition or results of operations of Crestwood, including in the ordinary course of business with its partners, other members or other equityholders in any jointly owned subsidiary of Crestwood with respect to such subsidiary, or the fact that an acquisition proposal has been made, the identity of the party making such proposal or the material terms of such proposal or otherwise, to the extent Crestwood determines that such information is required to be disclosed under applicable law or that the failure to make such disclosure is reasonably likely to be inconsistent with the duties of the Crestwood board of directors under applicable law and the Crestwood Partnership Agreement; provided, however, that any such disclosure that relates to the approval, recommendation or declaration of advisability by the Crestwood board of directors with respect to the merger agreement or an acquisition proposal will be deemed to be a change of the Crestwood board of directors recommendation to approve and adopt the merger agreement unless the Crestwood board of directors publicly states that its recommendation of the merger agreement has not changed or refers to the prior recommendation.

Additionally, Crestwood and its boards of directors will be permitted to disclose to the Crestwood unitholders a position or to issue a “stop, look and listen” communication under applicable Exchange Act rules, provided, however, any such disclosure that relates to the approval of the Crestwood board of directors with respect to the merger agreement or an acquisition proposal will be deemed to be a change of the Crestwood board of directors recommendation to approve and adopt the merger agreement unless it states its recommendation of the merger agreement has not changed or refers to the prior recommendation.

Crestwood is also permitted to seek clarifications of certain acquisition proposals. Crestwood has agreed to notify Energy Transfer promptly (orally and in writing and no later than 24 hours thereafter) upon the receipt of an acquisition proposal or any inquiry or request for discussions or negotiations regarding an acquisition proposal or for non-public information. Such notice must include the identity of the person making such acquisition proposal and if in writing, a copy of such written acquisition proposal and any related draft agreements, or, if oral, a reasonably detailed summary thereof, in each case, including any modifications made. Thereafter, Crestwood must keep Energy Transfer informed in all material respects on a prompt basis with respect to any change to the material terms of any such acquisition proposal (and no later than 24 hours following any such change).

 

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Obligation to Recommend and Maintain its Recommendation to Approve and Adopt the Merger Agreement

Crestwood, through the Crestwood board of directors, has agreed, subject to its right to change its recommendation in the circumstances described below, to recommend the approval of the merger agreement to its unitholders and to use its reasonable best efforts to solicit from its unitholders proxies in favor of the approval and adoption of the merger agreement and to take all other action necessary or advisable to secure the vote or consent of the Crestwood unitholders.

Except as permitted below, neither Crestwood nor the Crestwood board of directors nor any committee thereof may:

 

   

withhold, withdraw, amend, qualify or modify, including publicly proposing to do the foregoing, including by failing to include the recommendation of the Crestwood board of directors in this proxy statement/prospectus;

 

   

approve, adopt, authorize, resolve or recommend, or propose to approve, adopt, authorize, resolve or recommend, or allow Crestwood or any of its subsidiaries to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar contract or any tender or exchange offer providing for, with respect to, or in connection with, any acquisition proposal;

 

   

fail to reaffirm the recommendation of the Crestwood board of directors within ten business days of a request therefor by Energy Transfer following the date on which any acquisition proposal or material modification thereto is received by Crestwood or is published, sent or communicated to Crestwood’s unitholders, provided that if the Crestwood unitholders’ meeting is scheduled to be held within ten business days of such request, within three business days after such request and, in any event, prior to the date of the Crestwood unitholders’ meeting (provided, that Energy Transfer may not make any such request on more than two occasions with respect to each acquisition proposal, including any revision, amendment, update or supplement to such acquisition proposal); or

 

   

fail to publicly announce, within ten business days after a tender offer or exchange offer relating to the securities of Crestwood will have been commenced, a statement disclosing that the Crestwood board of directors recommends rejection of such tender offer or exchange offer and affirms the recommendation of the Crestwood board of directors.

Notwithstanding the foregoing, Crestwood is permitted to withdraw or make a change of recommendation and/or terminate the merger agreement at any time prior to the receipt