MAPCO Express Spinoff Not in Delek's Plans

BRENTWOOD, Tenn. – Delek US Holdings Inc. will not spin off its MAPCO Express convenience store division into its own company via an initial public offering (IPO), Uzi Yemin, president and CEO of the parent company said during today's third-quarter earnings call.

"We know others have done that," said Yemin, perhaps referring to companies such as Murphy Oil Corp., which recently announced it will spin off its retail division. "We believe in the ability to get retail to the right place to benefit our shareholders."

Yemin reported that Delek's retail approach will continue to be building 10 to 15 new MAPCO Express "mega stores" for the next two to three years. "These stores have performed extremely well for us," Yemin said on the earnings call.

Looking at the company's retail earnings, Mark Cox, Delek's chief financial officer, noted that MAPCO Express achieved a record 13th straight quarter of in-store merchandise sales increases in its fiscal third quarter, which ended Sept. 30. The division posted a 1.5 percent increase vs. the same period last year. Merchandise margins stood at 28.6 percent during the latest quarter, Cox added.

MAPCO Express' net earnings, however, declined to $11 million, compared to a profit of $15.6 million in its 2011 Q3. Lower fuel margins were cited as the main reason for the retail earnings decline. MAPCO Express achieved fuel margins of 13.9 cents in its latest quarter, compared to 18.8 cents during the same period last year.

Despite Yemin's desire to keep MAPCO Express under the parent company's umbrella, Delek is clearly not opposed to spinoffs. Yemin announced that the company's spinoff of Delek Logistics Partners LP was completed yesterday and the stock now trades on the New York Stock Exchange under the symbol DKL.

Delek Logistics Partners is a master limited partnership that owns, operates, acquires and constructs crude oil and refined products logistics and marketing assets.

Delek sold 9.2 million units of DKL for $21 per unit. The company received $176.2 million in proceeds from the transaction and dispersed 37.6 percent of DKL to the public in the transaction, while retaining the remainder. DKL was trading for $22.30 per unit in this morning's trade.

Companywide, Delek reported net income of $100 million for the third quarter. That compared to a profit of $85 million in its 2011 Q3. The company also stated that it is so confident in its business that it will increase its regular quarterly dividend to shareholders by well over 100 percent.

Delek US Holdings had 372 MAPCO Express locations as of Sept. 30.