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Sunoco Inks $3.3B Deal with 7-Eleven to Divest 1100 Stores
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Downstream petroleum distributor Sunoco LP (SUN - Free Report) recently signed a deal with 7- Eleven, a subsidiary of Japan-based retail conglomerate Seven & i Holdings Co., Ltd. As per the deal, the partnership will divest most of its convenience stores to 7-Eleven. The move is in line with Sunoco's plans to focus on its fuel supply business. Post the announcement of the deal, shares of the company rose 20% to close at $28.69.
Deals Highlights
Per the deal, Sunoco will sell around 1,100 convenience stores and gas stations in Texas and other states to 7-Eleven. The deal includes the sale of associated trademarks and intellectual property of Stripes and Laredo Taco Company brands.
As part of the deal, the partnership will also enter into a 15-year agreement with 7-Eleven to sell 2.2 billion gallons of fuel annually.
The transaction is valued at $3.3 billion and is expected to close in the second half of this year.
How Will the Deal Benefit Sunoco?
Following the trend ofU.S. energy firms to divest gas stations to concentrate on core business areas, Sunoco’s recent deal is likely to benefit the company. Marathon Petroleum Corporation (MPC - Free Report) is also contemplating a spinoff of around 2,700 fuel stations. Hess Corporation (HES - Free Report) and Valero Energy Corporation (VLO - Free Report) divested their gas stations in the past four years. The move is indicative of the fact that energy companies intend to remain focused on the core business of exploring, transporting and refining oil and gas.
The sale will primarily help the partnership to partially pay down $4.51 billion debt thereby making the balancesheet stronger. The proceeds from the sale will also be used for general partnership purposes that include mergers and acquisitions. The sale of gas stations will streamline the portfolio of the partnership leading to a lean, concentrated and a simplified business model.
The 15-year supply agreement will provide the partnership with regular long-term income thereby improving Sunoco’s financial profile.
Sunoco plans to sell another 200 stores and fuel outlets in North and West Texas by the end of the fourth quarter and expand its distribution business through acquisitions.
How Will the Deal Benefit 7-Eleven?
The deal boosted 7-Eleven’s operations in U.S. markets as the recent agreement has been one of the largest acquisition projects undertaken by the company. The move is in line with the company’s growth strategy to expand in the U.S. and increase the number of stores to 10000 by 2019. Currently the company has about 8700+ stores in the U.S. and Canada and the acquisition will increase company’s total number of stores to more than 9800.
Seven & i Holdings which runs general merchandising stores, specialty shops and other units, earns majority of its profit from the convenience store business. The company has not only been acquiring stores in the U.S. aggressively but also selling off some of its unprofitable domestic businesses. The deal expects to boost the company’s operating profit by 6%.
Zacks Rank
Sunoco, which is 44% owned by Energy Transfer Partners, is a wholesale fuel distributor. It engages in distributing motor fuel to convenience stores, independent dealers, commercial customers and distributors.
The partnership units outperformed the Zacks categorized Oil and Gas Refining and Marketing MLP industry over the prior three months. During the period, while units of Sunoco rallied by 4.8%, the broader industry declined 1.4%.
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Sunoco Inks $3.3B Deal with 7-Eleven to Divest 1100 Stores
Downstream petroleum distributor Sunoco LP (SUN - Free Report) recently signed a deal with 7- Eleven, a subsidiary of Japan-based retail conglomerate Seven & i Holdings Co., Ltd. As per the deal, the partnership will divest most of its convenience stores to 7-Eleven. The move is in line with Sunoco's plans to focus on its fuel supply business. Post the announcement of the deal, shares of the company rose 20% to close at $28.69.
Deals Highlights
Per the deal, Sunoco will sell around 1,100 convenience stores and gas stations in Texas and other states to 7-Eleven. The deal includes the sale of associated trademarks and intellectual property of Stripes and Laredo Taco Company brands.
As part of the deal, the partnership will also enter into a 15-year agreement with 7-Eleven to sell 2.2 billion gallons of fuel annually.
The transaction is valued at $3.3 billion and is expected to close in the second half of this year.
How Will the Deal Benefit Sunoco?
Following the trend ofU.S. energy firms to divest gas stations to concentrate on core business areas, Sunoco’s recent deal is likely to benefit the company. Marathon Petroleum Corporation (MPC - Free Report) is also contemplating a spinoff of around 2,700 fuel stations. Hess Corporation (HES - Free Report) and Valero Energy Corporation (VLO - Free Report) divested their gas stations in the past four years. The move is indicative of the fact that energy companies intend to remain focused on the core business of exploring, transporting and refining oil and gas.
The sale will primarily help the partnership to partially pay down $4.51 billion debt thereby making the balancesheet stronger. The proceeds from the sale will also be used for general partnership purposes that include mergers and acquisitions. The sale of gas stations will streamline the portfolio of the partnership leading to a lean, concentrated and a simplified business model.
The 15-year supply agreement will provide the partnership with regular long-term income thereby improving Sunoco’s financial profile.
Sunoco plans to sell another 200 stores and fuel outlets in North and West Texas by the end of the fourth quarter and expand its distribution business through acquisitions.
How Will the Deal Benefit 7-Eleven?
The deal boosted 7-Eleven’s operations in U.S. markets as the recent agreement has been one of the largest acquisition projects undertaken by the company. The move is in line with the company’s growth strategy to expand in the U.S. and increase the number of stores to 10000 by 2019. Currently the company has about 8700+ stores in the U.S. and Canada and the acquisition will increase company’s total number of stores to more than 9800.
Seven & i Holdings which runs general merchandising stores, specialty shops and other units, earns majority of its profit from the convenience store business. The company has not only been acquiring stores in the U.S. aggressively but also selling off some of its unprofitable domestic businesses. The deal expects to boost the company’s operating profit by 6%.
Zacks Rank
Sunoco, which is 44% owned by Energy Transfer Partners, is a wholesale fuel distributor. It engages in distributing motor fuel to convenience stores, independent dealers, commercial customers and distributors.
The partnership units outperformed the Zacks categorized Oil and Gas Refining and Marketing MLP industry over the prior three months. During the period, while units of Sunoco rallied by 4.8%, the broader industry declined 1.4%.
The partnership currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public. Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>