PHILADELPHIA -- As Sunoco Inc. deals with legal challenges to its merger with Energy Transfer Partners LP (ETP), it has laid out the circumstances under which the merger became possible, including revealing that along with private-equity suitors, it evaluated and considered approaching some leading convenience store and gas station players about a combination before pursuing the $5.3 billion transaction with ETP.
(Click here for previous CSP Daily News coverage of the ETP-Sunoco deal, announced in late April.)
In an August 29 filing with the U.S. Securities & Exchange Commission (SEC), Sunoco said that eight class-action complaints challenging the merger were filed in the Court of Common Pleas of Philadelphia County, Pa., subsequently consolidated, alleging that Sunoco's directors "breached their fiduciary duties by negotiating and executing, through an unfair and conflicted process, a merger agreement that provides inadequate consideration and contains impermissible terms designed to deter alternative bids."
Sunoco eventually agreed, "in order to avoid the expense and burden of continued litigation ... to make certain supplemental disclosures related to the proposed merger." It also "agreed to provide limited outplacement assistance services to Philadelphia-area employees of Sunoco who are adversely affected by the completion of the merger within one year of its closing (if any)."
In mid- 2011, while Sunoco was conducting its strategic review, it said "three private-equity firms approached members of Sunoco management at different times about acquiring some or all of the refining business of Sunoco and possibly Sunoco in its entirety. ... Following their review of the due diligence information, none of the private-equity firms expressed any interest in pursuing an acquisition of Sunoco in its entirety."
In January, an unnamedlarge petroleum refiner, marketer and transporter, approached then-chairman, president and CEO Lynn Elsenhans and then-senior vice president and CFO Brian MacDonald, about a potential merger. In February, ETP's Energy Transfer Equity LP (ETE) approached Sunoco and the management of an operator of a chain of c-stores and gas stations--also unnamed--to discuss the possibility of a strategic venture involving ETE, Sunoco and the operator.
Sunoco revealed in SEC filings that with the assistance of management and representatives of Credit Suisse, Sunoco's board considered forging deals with "convenience store and gas station operators, integrated oil companies, refiners, pipeline companies, master limited partnerships and other participants in the oil and gas industry, including non-U.S. companies."
According to SEC documents filed, Credit Suisse reviewed financial data for Alimentation Couche-Tard Inc., Laval, Quebec; Casey's General Stores Inc., Ankeny, Iowa; Susser Holdings Corp., Corpus Christi, Texas, and The Pantry Inc., Cary, N.C., companies with significant retail fuel distribution businesses and publicly traded equity securities.
"The board concluded that any other potential transaction partner would be speculative at the given time, and that management should focus its limited resources on [the large petroleum refiner, marketer and transporter] and ETE given their demonstrated interest."
While Sunoco's deal with ETP is moving forward, the fate of Sunoco's branded network of approximately 4,900 gas stations in 23 states in the Northeast, Southeast and Midwest has not been determined, at least publicly. Analyst speculate that ETP will sell the retail business, valued at about $1.8 billion, but ETP CEO Kelcy Warren has indicated that he is "very comfortable" with owning the retail network.
Click here to view Sunoco's proxy statement, and click here to view additional SEC documents.
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