Cover Story: Deal of the Year
Susser sale puts all eyes on multiples, MLPs
9x: That’s the estimated multiple that Susser Holdings fetched for the retail segment in the Susser-Energy Transfer Partners deal, as calculated by one analyst.
With the multiple for the entire purchase an eye-popping 10.5x, as estimated by Raymond James Investment Banking, this could easily be called the deal of the year (barring any other jaw-dropping announcements). Comparable publicly traded retailers range from The Pantry at 5.2x to Casey’s at 7.6x estimated 2015 EBITDA.
The $1.8 billion deal skyrocketed Susser Holdings’ shareholder value by 40% to $80.25 a share, setting a high bar for prime c-store assets and revealing the power of the tax-favorable business structure known as the MLP.
To say that the 630-store deal was mind-blowing may seem an overstatement for an industry that has seen big deals before, such as 2,200-store Alimentation Couche-Tard’s acquisition of Circle K in 2003 or even the purchase of 4,950 Sunoco locations just two years ago by Energy Transfer Partners (ETP). But this deal, announced in early May, is different for a number of reasons:
▶ The extraordinary multiple paid is in large part driven by the tax-preferred status ETP enjoys as a master limited partnership (MLP) operator.
▶ A family-run business, Corpus Christi, Texas-based Susser is considered a home-grown success story, a bastion of entrepreneurialism that embodies the ideals of individuality and independence within the channel.
▶ Potential on the c-store retailing side is enormous. Considering that one of the industry’s toughest challenges has been its transition from “smokes and Cokes” to offering foodservice at gas stations, Susser, with its profitable Laredo Taco Company concept, has successfully made that leap with a formula that can potentially be used across the country.
▶ Integrating Susser’s retail assets with Sunoco’s staggering 5,000 locations promises savings through increased buying power alone, estimated at $35 million a year.
▶ Texas. Need one say more? The area’s energy boom is fueling a population surge ripe for today’s c-store format, with Susser having a considerable “land bank” of properties ready to develop.
▶ And through a series of internal buybacks yet to come, the retail chain will emerge as its own separate business unit, with the expertise and scale of any comparable leading-edge c-store operator. The Susser-ETP deal shines a bright light on two critical elements facing the channel: The buying muscle behind MLPs and the raw profitability of consolidation. At that level, the annual savings after integrating general and administrative costs and the reworking of product contracts will reap an estimated $70 million a year, a significant sum that has nothing to do with actually selling more stuff.
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