Emerge Energy Sells Fuel Business To Sunoco; Analyst Reiterates Sell, Says Deals Doesn't Make Sense

A week and a half after some interesting moves in Emerge Energy Services LP EMES, there appears to finally a definitive reason for the run-up. In Thursday's after-hours session, Emerge Energy announced it would be selling its fuels business to Sunoco LP SUN for $178.5 million.

On June 9, Benzinga's PreMarket Prep host Joel Elconin brought attention a big surge in shares of Emerge Energy. Sure enough, shares proceeded to surge for another double-digit gain on June 10. Benzinga reached out to analysts and studied other sell-side notes, which believed the spike the last few days was due to a "catch-up trade" to the more favorable market conditions for the sector.

On Thursday afternoon, after the deal was announced, Benzinga reached out to DA Davidson's Sonny Randhawa to get his thoughts on Emerge's deal. Randhawa believes this deal doesn't make sense for Emerge Energy, saying, "Strategically they would want to hold onto the fuel division, as it is the only cash-flow positive part of their business."

He also mentioned the deal had to be done so Emerge wouldn't default on their debt, loan covenant. When followed up if the deal was overdone, Randhawa simply reiterated that he continued to have a Sell rating on the stock.

Shares of Emerge Energy Services were trading up 13 percent at $13.10 in the after-hours session.