Sunoco Reveals Background on Its Merger Decision

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Sunoco Reveals Background on Its Merger Decision


PHILADELPHIA -- Sunoco Inc. considered merging with convenience store and gas station operators before ultimately striking a deal with Energy Transfer Partners LP (ETP), the company revealed today in a Form 8-K filing with the U.S. Securities and Exchange Commission (SEC).

According to the SEC filing, throughout the middle of 2011, "while Sunoco was conducting its strategic focus on its core and most profitable businesses, three private [equity] firms approached members of Sunoco management at different times about acquiring some or all of the refining business of Sunoco, and possibly Sunoco in its entirety."

However, former Sunoco CEO Lynn Elsenhans and current CEO Brian MacDonald reported that the private equity interest later waned, so the oil company's board of directors subsequently sought other options with the help of management and partners from Credit Suisse. Among those options was to create a partnership with convenience store or gas station operators, integrated oil companies, pipeline companies, master limited partnerships and other participants in the oil and gas industry, including non-U.S. companies, the SEC filing stated.

Sunoco's filing did not reveal which convenience store and gas station operators it planned to approach for a potential merger.

After discussions, Sunoco's board of directors concluded that partnering with a c-store operator or any other partner would be "speculative at the given time." Therefore Sunoco decided to "focus its limited resources" on completing a deal with ETP or another company -- whom Sunoco did not name in the filing -- given their "demonstrated interest."

It is not common for companies to reveal this amount of detail in regards to a merger. However, Sunoco stated in its filing that it agreed to do so in connection with the settlement of eight outstanding stockholder lawsuits in the Court of Common Pleas of Philadelphia County, Pa.

"While Sunoco believes that the claims in the amended consolidated complaint are without merit, Sunoco has agreed, in order to avoid the expense and burden of continued litigation and pursuant to the terms of the proposed settlement, to make certain supplemental disclosures related to the proposed merger," Sunoco noted in its 8-K filing. Sunoco shareholders will vote on its proposed merger with ETP on Oct. 4. As CSNews Online previously reported, if the merger is approved, many Wall Street analysts speculate that Sunoco's network of 4,900 retail gas stations will be sold off since they are reportedly not a good fit for ETP's core business. Wawa Inc., Marathon Petroleum Corp., The Pantry Inc., Alimentation Couche-Tard Inc. and Global Partners have all been named as possible acquirers for Sunoco's c-store/gas station network.