Energy Transfer Partners LP, the owner of 35,000 miles of natural gas pipelines, will buy gasoline-station owner Susser Holdings Corp. for about $1.8 billion, expanding a retail unit it had been expected to sell.
Shareholders of Susser Holdings will have the option to receive either $80.25 in cash or 1.4506 Energy Transfer common units, or a combination, for each share held, Dallas-based Energy Transfer said today in a statement. The cash offer price represents a 41 percent premium over Susser’s closing price on April 25.
Kelcy Warren, Energy Transfer’s billionaire chief executive officer, paid $5.3 billion in 2012 for Sunoco Inc.’s 5,000 gas stations. The Susser deal builds the company’s retail presence in Texas, where an oil-drilling boom is driving economic growth.
Warren’s “continued M&A appetite” will “not surprise the market, although the target will as most had expected a sale of the Sunoco retail unit,” Ethan Bellamy, an analyst at Robert W. Baird & Co. in Denver, said in a note to clients today. “At first blush, the transaction looks likely to be beneficial to all parties.”
Energy Transfer Partners fell 1.9 percent to $54.76 at 12:09 p.m. in New York trading. Its parent company, Energy Transfer Equity LP, was down 0.4 percent at $46.68. Susser jumped 36 percent to $77.47.
Energy Transfer Partners said the “ultimate intention” is to create a standalone retail business containing both Sunoco’s stores and the 630 owned by Corpus Christi, Texas-based Susser. The business will reside in Susser Petroleum Partners LP, a partnership controlled by Susser Holdings, which will continue to be traded.
The plan is to expand the retail business, Jamie Welch, Energy Transfer Equity’s chief financial officer, said on a conference call for analysts. Susser’s Stripes-branded convenience stores are located in Texas, New Mexico and Oklahoma. They make more of their money from food and other items, balancing Sunoco’s fuel-heavy income, Welch said.
“It’s the ability for us to leverage the iconic Sunoco brand while also continuing to geographically expand the overall Stripes brand,” Welch said.
Warren, who didn’t speak on today’s call, acknowledged in a September interview a reputation as a deals-obsessed “cowboy.” He led a $13 billion buying spree in 2011 and 2012 to expand the reach of his company’s group of master-limited partnerships, or MLPs.
MLPs are structured to pay cash to unitholders, shielding the partnership from corporate taxes. Many MLPs are energy-related because the U.S. tax code limits the structure primarily to natural-resources businesses.
The boards of both companies approved the latest transaction, which is also supported by 10 percent of Susser Holdings shares and is expected to close in the third quarter. Energy Transfer forecast annual savings of $70 million from consolidating fuel buying, merchandising and other operations, and said further savings are likely.
Susser, which also runs the Sac-N-Pac chain of convenience stores, was founded in the 1930s and has been run by three successive generations of the Susser family. Chief Executive Officer Sam L. Susser is the company’s largest shareholder, with 11 percent of shares as of March 4, according to data compiled by Bloomberg.
Barclays Plc and Credit Suisse Group AG advised Energy Transfer. Morgan Stanley provided a fairness opinion to the board. Bank of America Corp. advised Susser.