DALLAS & HOUSTON -- Driven by the view that accelerating the process was in the best interest of all parties, Energy Transfer Partners LP (ETP) and Sunoco LP have announced the dropdown now of the remaining 68.42% interest in Sunoco LLC and 100% interest in the legacy Sunoco retail business for approximately $2.226 billion, ahead of the anticipated 2017 time frame.
As reported in a 21st Century Smoke/CSP Daily News Flash, the deal completes $5.7 billion of retail business dropdowns from ETP to Sunoco LP in just over a year.
“With very decisive action,” ETP has completed a “very transformative dropdown strategy,” Jaime Welch, group CFO of ETP, said during a conference call announcing the deal.
“The transaction as we have structured it … is really all about containment of funding, and as a result of getting a [loan] that has been fully committed and underwritten by a group of five banks … and $750 million of an equity private placement,” he said. “As a result of this funding structure, Sunoco will not need to access the equity markets in 2016. We think this is a tremendous accomplishment. … This will alleviate what has been a very dark and heavy cloud over ETP given the concerns and volatility in the capital markets and the need to actually create funding.”
“Show me the money? So we did,” he said.
Sunoco LP CEO Bob Owens said, “This is a critical milestone. From Oct. 2012, when Sunoco joined the Energy Transfer family, the management had a vision of where we wanted to go, with a couple of other key stops along the way. The first key stop was the acquisition of Susser Holdings in Aug. 2014. That gave us the vehicle, with SUSP [Susser Petroleum Partners LP], and in the last 12 months, we have moved quickly” with the dropdowns and including the acquisition last year of Aloha Petroleum.
“This win-win transaction completes that journey,” he said. “The consolidated [Sunoco LP] business today presents a very compelling array of investment highlights. We like the industry. The fuel business, in our judgement, is going to be resilient for decades to come. And we like our position in it, and we like the brand that we’ve got with the Sunoco brand.”
“What Bob can do under one common umbrella, rather than having a dislocation of pieces,” will leading to continuing improvements, Welch said.
All of the income from the Sunoco retail assets will be non-qualifying income to Sunoco LP; therefore, those assets will be immediately contributed to Sunoco’s wholly owned corporate subsidiary, Susser Petroleum Property Co. LLC.
ETP will remain the largest unitholder of Sunoco LP with an approximate 46% LP interest.
This transaction will complete Sunoco LP’s transformation into one of the leading wholesale fuel and retail marketing platforms in the United States with tremendous geographic scale and a unique diversity of business drivers, the company said.
With the completion of the dropdown program, Sunoco LP will be able to focus on a broad range of opportunities to grow via third-party acquisitions, both wholesale and retail, and capital projects, as well as through organic expansion.
The transaction will be effective as of Jan. 1, 2016, and the companies expect it to close in Feb. 2016, subject to customary closing conditions.
Sunoco LLC distributes motor fuels across more than 26 states in the U.S. East, Midwest and Southeast to approximately 860 Sunoco-branded dealer locations under long-term fuel supply agreements, other distributors of Sunoco-branded fuel that supply 3,700 third-party retail fuel outlets and approximately 400 other commercial customers under short-term contracts.
The fuel sold by Sunoco’s retail business is supplied by Sunoco LLC at 438 company-operated Sunoco and APlus branded convenience stores and other retail fuel outlets across the country.
The company also confirmed a CSP Daily News report that it is bringing Stripes’ Laredo Taco Co. Mexican restaurant concept to other markets. “We are in the process of testing in the Northeast, and we’re hoping that gains traction,” said Owens.
Houston-based Sunoco LP is a master limited partnership (MLP) that operates more than 850 convenience stores and retail fuel sites and distributes motor fuel to c-stores, independent dealers, commercial customers and distributors located in 30 states at approximately 6,800 sites, both directly as well as through its 31.58% interest in Sunoco LLC, in partnership with an affiliate of ETP. Sunoco LP’s general partner is owned by Energy Transfer Equity LP (ETE).
Dallas-based ETP is an MLP owning and operating one of the largest and most diversified portfolios of energy assets in the United States.
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