Energy Transfer Equity L.P. agreed to buy Southern Union Co. for $4.2 billion, a move that will create the largest natural-gas pipeline company in the U.S.

The combined company will have more than 44,000 miles of natural gas pipelines and about 30.7 billion cubic feet per day of natural gas transportation capacity.

Dallas-based Energy Transfer said Thursday it will pay $33 a share for Southern Union, a 17% premium to Southern Union’s closing stock price on Wednesday.

Southern Union shares surged 15% to $32.50 in premarket activity. They last traded above the offer price in the middle of 2007, though they have risen 17% so far this year.

Energy Transfer would also assume $3.7 billion in Houston-based Southern Union’s debt, boosting the overall transaction value to $7.9 billion.

Energy Transfer said it has identified about $100 million in commercial and operational synergies as well as an additional $25 million in one-time savings.

“The acquisition of Southern Union will significantly enhance and diversify ETE’s cash flow profile, making this transaction accretive to ETE’s unitholders while preserving our commitment to maintaining investment-grade credit metrics at ETP and SUG and achieving investment grade status at Regency,” said Energy Transfer Chairman Kelcy Warren.

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