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UPDATE 4-AmeriGas snaps up Energy Transfer’s propane business for $2.8 bln

* Expects to declare one-time distribution increase of 3 pct on deal closureBy Vaishnavi Bala and Swetha GopinathOct 17 (Reuters) - AmeriGas Partners L.P. will buy Energy Transfer Partners L.P.’s propane business for $2.8 billion, helping the largest U.S. propane retailer nearly double its customers and cash in on a price increase for the heating fuel.About 5 percent of total U.S. households use propane for heating. The U.S. Energy Information Administration expects propane to be costlier this winter.AmeriGas, 44 percent owned by gas distributor UGI Corp , will add over one million retail propane customers and over 500 million gallons to its distribution operations.”We can definitely see some positives in terms of quality of their business versus AmeriGas existing territory…propane companies are looking at jacking up margins they are making on every gallon they sell as they have so much pricing power,” Morningstar analyst Mark Barnett told Reuters.By selling off its propane business to AmeriGas, Energy Transfer looks to focus on its pipeline assets, signalling the move among energy companies to concentrate on the increasing value of their pipeline assets.Earlier on Monday, Enterprise Products said it will sell some natural gas storage facilities to partly fund the construction of its midstream energy projects.Energy Transfer Partners’ general partner - Energy Transfer Equity LP - is engaged in a takeover battle with Williams Cos for pipeline operator Southern Union Co .AmeriGas shares were almost trading flat at $45.72 while Energy Transfer was up 4 percent on the New York Stock Exchange on Monday.DEBT CONTROLThe value of pipeline assets has shot up sharply with oil majors spending billions of dollars to develop and produce shale gas and crude oil in areas with poor infrastructure.Energy Transfer has been looking to shed its propane business for a long time, analysts say.”The cash from the sale will help reduce ETP’s debt and external capital requirements, which we believe has been weighing on ETP units,” RBC Capital Markets analyst Elvira Scotto said.Energy Transfer’s long-term debt stood at $7.64 billion as of June 30, according to Thomson Reuters data.On Sunday, Kinder Morgan Inc struck a $21 billion deal to buy rival El Paso Corp , combining the two largest natural gas pipeline operators in North America.The Energy Transfer deal, which is expected to close in late 2011 or early 2012, comprises $1.5 billion in cash and about $1.3 billion in AmeriGas units.AmeriGas expects to declare a one-time distribution increase of 3 percent following deal close.Energy Transfer’s propane operations extend over 41 states.J.P. Morgan Securities LLC advised AmeriGas on the transaction.