Tuesday, April 29, 2014

Stripe's New Owner: Energy Transfer

West Texas convenience stores are a window into the financial machinations that occupy corporate executives today.  In 2007 Town & Country sold out to Susser Holdings, which converted our region's T&C stores to the Stripes brand.  Susser monetized half of its petroleum operations by spinning off Susser Petroleum in September 2012.

Yesterday Energy Transfer Partners (ETP) announced it would acquire all of Susser for $1.8 billion.  Consider what Zack's had to say about Susser after it shot up 36% (as a result of the announced deal):

This convenience store chain has seen four negative estimate revisions in the last 30 days.
Two aspects of the deal caught my eye.  First, Energy Transfer Partners plans to shift "existing Sunoco and Susser retail businesses into Susser Petroleum."  These moves are expected to "generate significant cash proceeds to ETP over the next several years, further strengthening ETP credit metrics."  Such an internal shift could be a method for ETP to monetize its retail holdings, possibly at a premium price.

Second, ETP will hold the General Partner interest and Incentive Distribution Rights in Susser Petroleum, which could later become a cash bonanza should Susser Petroleum be sold.

"An exchange of SUSP GP/IDRs held by ETP for ETP common units held by Energy Transfer Equity (ETE), combined with the eventual monetization of SUSP units would allow ETP to fully exit the retail business in a highly accretive manner."

This means two Energy Transfers, Energy Transfer Partners and Energy Transfer Equity, could make huge money off the 50% stake in Susser Petroleum.

West Texans can expect:

Entry of the Sunoco brand into Texas and neighboring states presents opportunities for additional margins through expansion of dealer and distributor channel.

Expansion of the Stripes business into adjacent states.
I hope that margin expansion isn't due to higher gasoline prices, but someone has to pay for corporate complexity and legal machinations, not to mention executive incentive pay.

Update 4-30-14:  The move of assets to Susser Petroleum is a tax avoidance move as Susser Petroleum is a Master Limited Partnership.

Update 6-15-14:  Several Stripes locations in San Angelo have no gasoline to sell.  I just drove by one with yellow bags over all the gas pump handles.  It seems harsh weather impacted refinery operations utilized by Susser Petroleum. 

No comments: