* Energy Transfer offers $33/shr, a 17 pct premium
* Deal, including debt, valued at $7.81 bln
* Deal expected to close in Q1 2012
* Deal expected to immediately add to distributable cash flow (Adds conf call details, analyst comments; Updates shares)
BANGALORE, June 16 (Reuters) - Pipeline operator Energy Transfer Equity LP will buy smaller rival Southern Union Co for about $4.1 billion to nearly double its capacity and position itself for likely future gas demand both at home and from emerging economies.
Southern Union shares jumped more than 17 percent to their highest in almost 4 years, and were trading above the $33 per share offer price, suggesting investors think the bidding could go higher.
Gordon Howald, analyst at East Shore Partners, said Southern Union has had activist shareholders in the past, and there could be pressure on the company to push for more of a premium, though he said the 17 percent premium on offer was attractive.
Despite weak natural gas prices NGc1, production has been rising as energy companies pile into shale fields -- underground rock formations rich in oil and gas.
Evolving technologies are helping them tap into these reservoirs that could meet U.S. fuel needs for a century and increased demand from fast-growth economies such as China.
Increased production from shales such as Marcellus in the eastern United States has also benefited companies transporting and processing natural gas. A number of midstream companies have already expanded related facilities and services.
The combination of Energy Transfer (ETE) and Southern Union will own more than 44,000 miles of gas pipelines and about 30.7 billion cubic feet of transportation capacity per day, ETE said.
"Energy Transfer has more access to most of the shale plays than any other pipeline company in the United States," ETE Chairman Kelcy Warren said on a call with analysts.
"Southern Union goes from those supply hubs to many market consuming hubs. That is a big thing," he said, noting ETP's past vulnerability to margins being squeezed.
ETP -- Energy Transfer Partners -- and Regency Energy Partners LP are the two limited partnership units of ETE, which compete with DCP Midstream Partners LP and Enbridge Inc (USA) .
In March, Dallas-based ETE teamed up with Regency to buy natural gas liquids storage and transport assets from Louis Dreyfus for $1.92 billion.
SYNERGIES AND SAVINGS
Southern Union shareholders will swap each common share for newly-issued Series B units of ETE for $33. Including about $3.7 billion of Southern Union debt, the deal is valued at $7.81 billion.
ETE said the deal, expected to close early next year, should immediately add to its distributable cash flow. It expects synergies of $100 million and one-off savings of $25 million.
Southern Union owns and runs more than 20,000 miles of pipelines, and serves more than half a million end-users in Missouri and Massachusetts.
Credit Suisse Securities advised ETE on the deal, while Southern Union was advised by Evercore Partners.
Units of Energy Transfer rose more than 6 percent to $45.16 on Thursday on the New York Stock Exchange. Southern Union shares last traded up 17 percent at $33.15.
(Reporting by Krishna N Das in Bangalore; Editing by Joyjeet Das)