Sunoco LP About to Pull Trigger on C-store Acquisitions

HOUSTON — Sunoco LP is currently working on smaller-scale convenience store acquisitions and is “optimistic we can announce something shortly,” CEO Bob Owens stated Thursday during the company’s 2015 fiscal fourth-quarter earnings call.

Owens said he could not announce the deals during the call since the transactions are not yet final, but indicated word should come soon.

Beyond these deals, he noted that Houston-based Sunoco LP will continue to look for further merger and acquisition opportunities, but will maintain its rigid criteria, including stores that are located in “attractive markets at a financially attractive price.”

The soon-to-be announced deals come on the heels of the final dropdown of retail and wholesale fuel assets from Energy Transfer Partners LP to Sunoco LP, a master limited partnership. This transaction will be officially completed in March, confirmed Owens, although it became effective Jan. 1. Included are 438 convenience stores, primarily in the Northeast, operating under the Sunoco and APlus banners.

Sunoco LP will pay Energy Transfer Partners $2.226 billion, much of which will be paid for via a $2.035-billion term loan due in 2019.

“I want to say how excited I am. The transaction will be immediately accretive to shareholders,” Owens remarked Thursday.

Some of these dropped-down locations will offer Laredo Taco Co. quick-service restaurants, which the master limited partnership acquired from Susser Holdings Corp.’s Stripes chain and is expanding outward.

Laredo Taco sites are now located at four Sunoco LP c-stores in Pennsylvania and Tennessee. Two more locations will open in the Northeast in 2016’s first quarter, with a goal of 15 new locations by the end of this year.

Customer reaction in non-Texas locations to Laredo Taco Co. has thus far been quite positive, but it is still only a test right now, according to Owens. Sunoco LP is currently determining what the demand will be for Laredo Taco at its smaller-footprint Northeast locations.

Sunoco LP is also continuing to convert Texas sites to the Sunoco fuel brand. Two hundred c-stores in the Lone Star State now carry the Sunoco brand, the chief executive revealed.

As of Dec. 31, Sunoco LP operated 725 convenience stores and retail fuel outlets in Texas, New Mexico and Oklahoma, as well as 175 c-stores under the MACS, Tigermarket and Aloha brands.


Sunoco LP’s adjusted EBITDA saw a healthy increase of nearly $47 million, to $112.2 million, during the fourth quarter ended Dec. 31, compared to the same quarter in 2014. Stripes locations, which were officially acquired from Susser Holdings Corp. last year, were cited as the reason for the strong rise.

Stripes was also a main reason revenues nearly tripled from $1.3 billion to $3.7 billion, as well as total gross profits, which more than tripled year over year to $333.2 million.

Breaking down the Stripes acquisition further, the move led Sunoco LP’s in-store merchandise sales to rise by a whopping 918.8 percent year over year to $400.4 million, and contributed $132.7 million in gross profit.

Same-store sales also increased at Stripes locations in 2015 for the 27th consecutive year, Owens announced.

At the forecourt, Stripes locations sold 291.4 million gallons of fuel in the fourth quarter, with gross profits on these gallons reaching $52 million, or 17.9 cents per gallon.

Regionally speaking, Sunoco LP had one weak spot in terms of both fuel sales and merchandise sales. Low oil prices damaged its c-stores operating in the southern and western portions of Texas, where oil drilling is a significant business. Because of weaker results in these regions, same-store Stripes sales decreased by 1.1 percent year over year in 2015’s fourth quarter, while fuel sales declined by 4.9 percent.

Once all the Energy Transfer dropdowns are completed, these stores will account for about 10 percent of Sunoco LP’s entire c-store portfolio.

Although sales in those Texas regions was a setback, Sunoco LP c-stores in Hawaii, Washington, D.C., Nashville and Philadelphia have performed extremely well, Owens relayed.

The CEO also stressed that unlike other master limited partnerships facing the perils of lower oil prices, Sunoco LP continues to be strong operator with a wide diversity of assets, including c-stores that are “economic cycle proof."

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