Mergers & Acquisitions

Sunoco Acquires C-Stores, Supply Contracts From Denny Oil

‘Third-party acquisition activity has added significant scale’ to retail network

DALLAS --Sunoco LP has agreed to purchase six convenience stores and fuel supply contracts with 127 wholesale dealers and 500 commercial customers in eastern Texas and Louisiana from Denny Oil Co. Inc. for approximately $55 million, president and CEO Bob Owens, said during Sunoco’s second-quarter 2016 earnings call.

*Click here for details on Sunoco LP’s second-quarter earnings.

The Nacogdoches, Texas-based company, founded in 1972, has a group of “attractive, well-run assets in a geography where there will not be much geographic overlap with our current operating profile, and we are pleased to expand into the area,” Owens said.

The stores are located in the metropolitan areas of Dallas and Houston, and in Louisiana.

“Third-party acquisition activity has added significant scale … over the last two years,” said Owens. Excluding assets acquired from the drop-down transactions from its partnership with Energy Transfer Partners LP (ETP), Sunoco has completed or announced transactions totaling about $700 million, adding approximately 125 retail locations, more than 600 million total gallons, and expanded its terminaling and processing assets.

“We continue to view the partnership as a consolidator and will look for opportunities to add well-run assets in attractive geographies and take advantage of the fragmented nature of the c-store market to drive growth for the partnership and returns for our unitholders.”

When asked if the industry can expect large acquisitions in the $700 million range, for example, Owens said it would surprise him to find opportunities that would amount to that.

“Our leverage is higher than we would like it to be and we have a desire to reduce that leverage and a plan to do it, and we're working that plan. That is just causing us to be a bit more selective in the M&A area right now,” he said. “The M&A area, though, continues to provide us with opportunities, and when you look at the industry itself, we've talked previously about how fragmented it is. We think we will be able to thread the needle, finding opportunities that still are very attractive and very accretive, but at the same time enable us to delever.”

In the second quarter, Sunoco opened six new stores, bringing the year-to-date openings to 10 locations. Nine of the 10 were in Texas, focused primarily in the South and Southeast regions of the state.

The company has another 23 sites under construction and plans to open at least 35 new-to-industry (NTI) locations during calendar year 2016. All of the NTI sites it opened this year include a Laredo Taco Company (LTC) offering, bringing the number of LTCs to 452.

It has also opened 10 LTCs outside of Texas earlier this year with plans to open approximately 10 additional locations by the end of 2016.

“Despite struggling restaurant industry sales throughout the state of Texas, Laredo Taco margins have remained steady, and we anticipate commodity and food cost to remain stable through the rest of 2016,” said Owens.

Dallas-based Sunoco LP is a master limited partnership (MLP) that operates approximately 1,340 retail fuel sites and convenience stores (including APlus, Stripes, Aloha Island Mart and Tigermarket brands) and distributes motor fuel to c-stores, independent dealers, commercial customers and distributors located in more than 30 states at approximately 6,900 sites. Its parent, Energy Transfer Equity LP, owns Sunoco's general partner and incentive distribution rights.

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