ETP's Integration Plan for Susser, Sunoco

Deal will create standalone retail business with nearly 5,650 convenience stores

Published in CSP Daily News

DALLAS -- The acquisition of Susser Holdings Corp. by Energy Transfer Partners LP (ETP) will lead to the creation of a combined, standalone retail business under the Susser Petroleum Partners LP business unit, the companies said.

ETP announced earlier today that it has entered into a definitive merger agreement to acquire Susser Holdings, including Susser Petroleum, in a unit and cash transaction valued at a total consideration of approximately $1.8 billion.

The deal includes Corpus Christi, Texas-based Susser Holdings' existing retail operations, consisting of 630 Stripes and other convenience stores in Texas, New Mexico and Oklahoma, most under the Stripes banner, but including 47 under the Sac-N-Pac banner acquired earlier this year.

Dallas-based ETP owns the Sunoco network of more than 5,000 retail stores, primarily on the East Coast. It bought the assets of Philadelphia-based Sunoco in 2012, including its pipeline and retail operations.Sunoco operates approximately 515 retail stores, delivers fuel to 1,100 dealers and supplies fuel to distributors for delivery to another 3,500 sites. It Sunoco distributes fuel in all states east of the Mississippi.

Sunoco operates the APlus c-store brand and in fall 2013 acquired the 300-store Mid-Atlantic Convenience Stores (MACS) chain, which operates its store under the Circle K banner as a "brand developer" for the brand owned by Laval, Quebec-based Alimentation Couche-Tard Inc.

The ETP-Susser deal broadens Sunoco's geographic footprint by giving it an "exceptional" base in Texas and the surrounding states.

Action plan

In acquiring Susser Holdings, ETP will own the general partner (GP) interest and the incentive distribution rights (IDRs) in Susser Petroleum, approximately 11 million Susser Petroleum common units (representing approximately 50.2 % of Susser Petroleum's outstanding units) and Susser Holding's existing retail operations.

ETP said that it intends to drop down, or sell to Susser Petroleum, all of the combined retail businesses. This dropdown plan also establishes a means to allow ETP to completely segregate the combined retail business into Susser Petroleum, with its own access to capital and balance sheet.

In addition to the dropdowns, ETP expects the Susser Petroleum incentive distribution rights (IDRs) cash flow it receives to continue to grow as Susser Petroleum cash flows grow through organic growth, acquisitions and expected synergies.

ETP said that it plans to create a "strong and diversified standalone retail business that provides significant value and synergy opportunities and a platform for future growth. The anticipated Sunoco and [Susser Holdings] dropdowns into [Susser Petroleum] gives the overall retail business its own identity, tremendous scale, geographic and cash flow diversification, while eventually separating it from ETP."

Susser Holdings has achieved a remarkable track record of sustained earnings growth and currently operates 630 retail convenience stores that sell either nationally or regionally branded gasoline or sell gasoline under the "Stripes" brand. Through these retail stores and its fuel distribution network, Susser Holdings is also one of the largest non-refiner suppliers of motor fuel in Texas with 1.6 billion gallons sold in 2013. The focus of Susser Holdings in Texas and its neighboring states has allowed it to capitalize on the strong Texas economy, as well as the demographic changes occurring in these markets.

"The combination with Energy Transfer Partners and Sunoco is the right next step for Susser Holdings and delivers significant value for Susser Holdings shareholders. This transaction also enables our shareholders who elect ETP units to participate in the future growth of the retail business," said Sam L. Susser, Chairman and CEO of Susser.

Management scorecard

Bob Owens, president and CEO of Sunoco Inc. will serve as the president and CEO of the combined businesses, reporting to Kelcy Warren, chairman and CEO of ETP. Sam L. Susser will continue as chairman of Susser Petroleum. The management team will combine members from both organizations to prepare for and execute the integration of the combined businesses.

ETP is a master limited partnership (MLP) owning and operating one of the largest and most diversified portfolios of energy assets in the United States. It owns and operates approximately 35,000 miles of natural gas and natural gas liquids pipelines. ETP owns Sunoco Inc., 100% of Panhandle Eastern Pipe Line Co. LP and a 70% interest in Lone Star NGL LLC, a joint venture that owns and operates natural gas liquids storage, fractionation and transportation assets. ETP also owns the general partner, 100% of the incentive distribution rights and approximately 33.5 million common units in Sunoco Logistics Partners LP, which operates a geographically diverse portfolio of crude oil and refined products pipelines, terminalling and crude oil acquisition and marketing assets.

Susser Holdings is a third-generation, family-led business. Restaurant service is available in approximately 400 of its c-stores, primarily under the proprietary Laredo Taco Co. brand. Susser Holdings also is majority owner and owns the general partner of Susser Petroleum, which distributes approximately 1.6 billion gallons of motor fuel annually to Stripes stores, independently operated consignment locations, c-stores and retail fuel outlets operated by independent operators and other commercial customers in Texas, New Mexico, Oklahoma and Louisiana.

Part for CSP's 2014 Convenience Top 101 retailers
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M&A