Marathon Minnesota Deal Closes

SuperAmerica site sale to ACON, TPG, sale-leaseback to Realty Income finalized

Published in CSP Daily News

HOUSTON -- Marathon Oil Corp. has announced that its wholly owned subsidiary Marathon Petroleum Co. LP (MPC) has closed the transaction--announced in May--with ACON Investments LLC (ACON) and TPG Capital (TPG) for the sale of most of Marathon's Minnesota downstream assets. ACON and TPG formed Northern Tier Energy LLC to operate the assets as a standalone company.

Included in the transaction are the 74,000-barrel per day St. Paul Park refinery and associated terminals, 166 SuperAmerica convenience stores (including six stores in Wisconsin), SuperMom's bakery and commissary, [image-nocss] SuperAmerica Franchising LLC, interests in pipeline assets in Minnesota and associated inventories.

Also, Realty Income Corp. said that it has completed a sale-leaseback transaction--announced in early October--for the acquisition of 135 of those SuperAmerica c-stores and one support facility in Minnesota and Wisconsin for approximately $248 million under long-term, triple-net lease agreements. These and certain other assets were sold by Marathon Oil and will be leased to newly formed companies owned and operated by Northern Tier Energy, a portfolio company of ACON Investments and TPG Capital.

( Click here for previous CSP Daily News coverage of the SuperAmerica sale.)

The total sales value of the Northern Tier deal is approximately $935 million, including Northern Tier preferred stock with a stated value of $80 million. Approximately $330 million of the total sales value is for the inventories associated with these operations. The transaction also contains earnout and margin support components where Marathon could receive up to an additional $125 million over eight years or may be required to provide up to $60 million of margin support to the buyers, subject to certain conditions. Any margin support paid will increase the total earnout amount that may be received by Marathon.

Realty Income acquired the 136 SuperAmerica properties under 15-year, triple-net, lease agreements. The stores average approximately 3,500 leasable square feet on approximately 1.14 acres. In addition, the individual locations have, on average, 6.5 multi-pump gasoline dispensers and are seasoned stores with long-term operating histories. The stores are operationally strong with gallons sold and merchandise sales well above national averages, and strong cash-flow coverage of rent at the store levels.

"The high quality stores, good locations, strong operating history, long-term leases and management team make these stores a welcome addition to our portfolio of properties," said Realty Income CEO Tom A. Lewis. "Including the SuperAmerica transaction, and other properties to be acquired in the fourth quarter, we now anticipate that acquisition activity should exceed $700 million for 2010."

With this acquisition, the company anticipates that the convenience store industry will now generate approximately 20% of Realty Income's revenue.

In 2004, Realty Income acquired 112 Circle K-branded convenience stores, under long-term, net-lease agreements, from Laval, Quebec-based Alimentation Couche-Tard Inc. for approximately $100.5 million.

ACON Investments is a Washington-based firm that manages private-equity funds and special-purpose investment partnerships with investments in the United States, Europe and Latin America. It has been a longtime energy investor, with experience in upstream and midstream oil and gas as well as investments in power infrastructure and energy services, including Mariner Energy, Chroma Oil and Gas, Milagro Oil & Gas, Signal International, Tropigas Inc. and SAE Towers.

San Francisco-based TPG Capital is the global buyout group of TPG, a private investment firm with more than $48 billion of assets under management. It has experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings. TPG has significant experience in the energy sector with investments including Alinta Energy, Belden & Blake, Copano Energy, Denbury Resources, Energy Future Holdings (formerly TXU), Texas Genco, and Valerus Compression Services. TPG has also been an active investor in the retail sector with investments including American Tire Distributors, Burger King, Debenhams, J.Crew, Myer, Neiman Marcus and PETCO.

Escondido, Calif.-based Realty Income is a real-estate company providing shareholders with monthly income supported by the cash flow from more than 2,400 properties located in 49 states owned under long-term lease agreements with leading regional and national chains and other corporate entities. The company is an active buyer of commercial properties nationwide.

Houston-based Marathon is an integrated international energy company engaged in exploration and production; oil sands mining; integrated gas; and refining, marketing and transportation operations. It is the fourth largest U.S. integrated oil company and the nation's fifth largest refiner.