It’s all about the cash going out the door.

That’s not the impression Kelcy Warren and the rest of Energy Transfer’s management hoped to leave, of course, in announcing an all-equity merger between corporate siblings Energy Transfer Partners (NYSE: ETP) and Sunoco Logistics (NYSE: SXL).

There was a lot of rhetoric about “extend(ing)  SXL’s strategic footprint,” “ability to capitalize on commercial synergies” and “complementary businesses creat(ing) tremendous value.”

But the bottom line is that the combined partnership will save close to $600 million next year on distributions to limited partners over what ETP and SXL were on the hook for on their own at their current distribution rates.

ETP, with more than double the market capitalization of SXL, was yielding 10.7% as of last week. SXL’s yield was at 7.8%. That’s why, despite its smaller size, SXL is the designated acquirer, offering 1.5 of its units for every one of ETE’s in a tax-free exchange expected to close in the first quarter of next year.

For ETP unitholders, this will amount to a 27.5% distribution cut, a loss unmitigated by the fact that the merged entity will assume the Energy Transfer Partners name. That’s why ETP’s unit price dropped as much as 9% on the news before ending the day 7% lower.

Management argued that ETP was facing the prospect of such a 15-25% payout cut in any case given its high debt leverage and skimpy coverage, though it didn’t bring up the possibility in the recent quarterly report or conference call.

This way it won’t go down as a cut in the distribution records. And there are more tangible compensations as well, starting with access to SXL’s higher-quality cash flow and the return to full distribution coverage even as distribution growth resumes at an annual rate of around 10% next year.

In many ways, the SXL unitholders get a worse deal, their fee-based pipeline and terminal revenue diluted with ETP’s large and significantly riskier gas  gathering exposure. SXL’s unit price slid almost 7%.

In truth both declines were probably unwarranted since ETP’s inadequate coverage was hardly a secret and SXL’s pipelines depend on a large gathering footprint, regardless of how the corporate asset shells are shuffled.

Such intramural gymnastics are almost always a zero-sum game, so it seems doubtful that both ETP and SXL deserve to be discounted for getting together. The general partner of both entities, Energy Transfer Equity (NYSE: ETE), appreciated nearly 4% on the day, and is now up 28% over the nine trading sessions since Election Day to 28%.  ETE stands to collect a little less from its incentive distribution rights in the immediate aftermath of the merger but should make that up soon after as the new ETP channels its distribution savings into growth projects that will eventually profit its parent.

On the conference call explaining the deal, one of the analysts asked Warren whether it’s “a steppingstone” to a merger between ETP and ETE that might address the drag from the general partner’s incentives and the merged ETP’s still high cost of capital. “I think it’s inevitable,” the CEO responded. “I think everybody on this call knows the math.” But he added that a discussion of such a combination would be “substantially premature.” It’s certainly substantially premature from the standpoint of Warren’s huge stake in ETE, because the general partner’s cash flow is likely to accelerate dramatically within two years as the significant subsidies it granted to see the ETP through its rough patch begin to dwindle. At that point, ETE should be in a better position to capitalize on a deal absorbing ETP. The distribution cut by way of merger announced this week will buy it a little financial breathing room in the meantime.

ETP remains a Hold and SXL a buy below a reduced limit of $28. ETE remains our top-ranked Best Buy below $22. All three are in the Growth Portfolio.