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Business Context and Reporting Period

This Form 8-K, dated November 27, 2019, is a current report filed by Energy Transfer LP regarding its proposed acquisition of SemGroup Corporation. The filing provides litigation-related supplemental disclosures to the previously filed Proxy Statement/Prospectus for the merger, which was originally announced on September 15, 2019. The disclosures were made to address seven stockholder lawsuits challenging the sufficiency of information in the merger materials and to avoid potential delays to the transaction closing.

Key Financial Metrics and Forecasts

The filing does not report historical revenue, profit, or cash flow for the current period. Instead, it discloses forward-looking financial forecasts utilized by financial advisor Jefferies for valuation analysis.

SemGroup Corporation Forecasts (in millions)

Energy Transfer LP Forecasts (in millions)

The filing notes that the market check process indicated Energy Transfer's offer of $17.00 per share was the highest value proposal, compared to indications of interest ranging from $12.00 to $15.00 per share from other potential buyers.

Material Changes and Litigation Status

The primary material change disclosed is the amendment of the Proxy Statement/Prospectus to address allegations in seven stockholder lawsuits (collectively the "Stockholder Actions"). These lawsuits, filed in Delaware, New York, and Colorado, allege violations of the Securities Exchange Act of 1934 due to omitted or misstated material information regarding the merger.

• Market Check Clarification: The filing clarifies that the SemGroup board instructed Jefferies to conduct a formal market check after receiving an increased, revised unsolicited proposal from Energy Transfer. The market check failed to generate a higher valuation than Energy Transfer's offer.
• Advisor Conflicts: The filing discloses that a representative of Jefferies held a de minimis amount of Energy Transfer common units through a managed account and that Jefferies held securities of both companies in the ordinary course of business. The SemGroup board determined these holdings were immaterial.
• Valuation Methodology: The filing provides specific details on the Discounted Cash Flow (DCF) analysis, including discount rates (10.77% and 9.77% for SemGroup; 10.15% and 9.15% for Energy Transfer) and terminal yield values used in the valuation.

Guidance, Outlook, and Risks

Management and the financial advisor maintain that the transaction represents the highest value for SemGroup stockholders. The filing includes standard forward-looking statement disclaimers, noting that actual results may differ materially due to various risks.

• Transaction Risks: Risks include the failure to obtain requisite regulatory and stockholder approvals, the inability to satisfy conditions to consummation, and potential negative impacts on relationships with employees, suppliers, and customers.
• Market Risks: The filing highlights volatility in the prices of oil, natural gas, and natural gas liquids as a key uncertainty affecting revenue and cash flow projections.
• Legal Position: Energy Transfer and SemGroup deny any wrongdoing or violation of law, stating the supplemental disclosures are made solely to eliminate litigation burdens and avoid delays to the merger closing.

Investor Verification Checklist

• Verify the status of the seven pending stockholder lawsuits and whether they have been consolidated or stayed.
• Confirm the outcome of the SemGroup stockholder special meeting scheduled for December 4, 2019.
• Review the definitive Proxy Statement/Prospectus (Form S-4) for the full context of the valuation analysis and transaction terms.
• Monitor regulatory approval status, particularly regarding antitrust clearance under U.S. competition laws.
• Assess the impact of current commodity price volatility on the projected EBITDA and distributable cash flow figures provided in the forecasts.