7-Eleven Gains Stores as Sunoco Changes Its Stripes

IRVING, Texas, and DALLAS -- In what will be its biggest acquisition deal ever, 7-Eleven Inc. has entered into an asset purchase agreement with Sunoco LP, which is shifting its focus away from retail and toward wholesale fuels distribution. As part of the $3.306 billion deal with Sunoco, 7-Eleven will acquire 1,108 of its convenience stores in 19 geographic regions.

As reported in a CSP Daily News Flash, 7-Eleven is acquiring the Sunoco locations primarily along the East Coast and in Texas, as well as the associated trademarks and intellectual property of the Stripes c-store brand and the Laredo Taco Company foodservice brand.

7-Eleven, No. 1 onCSP's Top 202 list of the largest c-store chains in the country, has 8,707 stores in the United States and Canada. This acquisition will bring the total number of 7-Eleven c-stores in the United States and Canada to 9,815.

Sunoco also is selling 207 convenience stores, 182 in west Texas and New Mexico and 25 in Oklahoma and north Texas, in a separate process.

Here's a look at details of the acquisition …

“This acquisition supports our growth strategy in key geographic areas, including Florida, mid-Atlantic states, Northeast states and Central Texas,” said Joe DePinto, president and CEO of 7-Eleven Inc. “It also provides 7-Eleven entry into Houston, the fourth-largest city in the United States, and a strong presence in Corpus Christi and across south Texas."

By acquiring part of Sunoco’s convenience-store business and gasoline retail business, 7-Eleven will expand its store network and offer greater convenience, while also improving profitability, said Seven & i Holdings Co. Ltd., the Tokyo-based parent company of 7-Eleven Inc., in an announcement of the transaction.

The deal with 7-Eleven also excludes Aloha Petroleum, with 54 retail locations in Hawaii, which Sunoco will not divest and “will remain a part of Sunoco,” Sunoco President and CEO Bob Owens said during a conference call on the deal. The deal also excludes any of Sunoco’s APlus franchise operations.

“Both of those assets are key to us going forward, things we’re interested in growing,” he said. “Aloha Petroleum continues as a highly efficient, integrated, standalone operation within Sunoco, and our successful APlus franchise offer will continue to be an area that will grow.”

With this deal, Sunoco is taking its first step in a strategic shift away from company-operated convenience stores to focus on its fuel supply business. Led by the Sunoco fuel brand and APlus c-store franchise, Sunoco plans to be a consolidator in the domestic wholesale fuels business, supplying fuel to a network of more than 8,900 locations of third-party dealers, distributors and other commercial customers, with an enhanced focus on master-limited-partnership (MLP) qualifying income.

“The sale of these retail assets to 7-Eleven is the beginning of an exciting evolution for Sunoco into a premier nationwide fuel supplier,” Owens said. “Our supply agreement with 7-Eleven provides Sunoco with a predictable long-term income stream, and this transaction quickly allows Sunoco to improve its financial profile.”

Also as part of the transaction, Sunoco will enter into a 15-year take-or-pay fuel supply agreement with SEI Fuel, a 7-Eleven subsidiary, under which Sunoco will supply approximately 2.2 billion gallons of fuel annually. This supply agreement guarantees annual payments to Sunoco, provides that 7-Eleven will continue to use the Sunoco brand at currently branded Sunoco stores and includes committed growth.

7-Eleven and Sunoco said that they expect the transaction to close in the second half of this year.

J.P. Morgan Securities LLC served as Sunoco’s exclusive financial adviser for the transaction with 7-Eleven. In addition, Sunoco has retained JP Morgan to market the remaining c-stores.

Dallas-based Sunoco LP is a master limited partnership (MLP) that operates 1,345 convenience stores and retail fuel sites and distributes motor fuel to 7,845 c-stores, independent dealers, commercial customers and distributors in 30 states.

Irving, Texas-based 7-Eleven operates, franchises or licenses more than 62,000 stores in 17 countries, including 10,900 in North America.