Transaction to give Sunoco greater geographic and channel diversification.
Sunoco LP (SUN) and Energy Transfer Partners L.P. (ETP) announced the second dropdown of a portion of ETP’s retail business to SUN.
SUN has agreed to acquire from ETP Retail Holdings, an affiliate of ETP, a 31.58% equity interest in Sunoco LLC, which distributes approximately 5.3 billion gallons per year of motor fuel to customers in the East, Midwest and Southeast regions of the U.S. The transaction is valued at approximately $816 million. SUN will pay $775 million in cash and issue $40.8 million of SUN common units to ETP Retail Holdings, based on the five-day volume-weighted average price of SUN’s common units as of March 20, 2015. SUN expects to fund the acquisition using proceeds from the private offering of senior notes.
Sunoco LLC distributes motor fuels across more than 26 states in the East, Midwest and Southeast regions of the U.S. to:
- Sunoco Inc. (owned by ETP) for resale at 440 company-operated Sunoco and APlus branded convenience stores and other retail fuel outlets.
- 882 Sunoco-branded dealer locations under long-term fuel supply agreements.
- Other fuel distributors of Sunoco-branded fuel that supply an additional 3,640 third-party retail fuel outlets.
- Approximately 400 other commercial customers under spot or short-term contracts.
Management expects that substantially all of the income from SUN’s interest in Sunoco LLC will be qualifying income.
The transaction is expected to close in April, subject to customary closing conditions and completion of financing arrangements. It is expected to be immediately accretive to distributable cash flow of both SUN and ETP for 2015 and beyond.
“This transaction gives us new exposure to customers in 26 states from Maine to Florida to Louisiana, where the Sunoco fuel brand is very strong, complementing our current base of wholesale customers in the Southwest and Hawaii,” said Robert Owens, president and CEO of Sunoco LP. “We will also enhance our sales channel portfolio with additional jobbers–who supply fuel to independent retailers–in our mix of customers,” he said.