Energy Transfer to Snap Up Susser Holdings for $1.8B - Analyst Blog

Natural gas transportation and storage partnership Energy Transfer Partners L.P. ETP has agreed to acquire gasoline retailer Susser Holdings Corp. SUSS for about $1.8 billion in cash and stock.

Corpus Christi, Texas-based Susser Holdings operates more than 600 Stripes and Sac-N-Pac retail stations – selling gasoline, diesel fuel and convenience store items – with a large footprint across Texas, New Mexico and Oklahoma. The company also provides restaurant service at around 370 of its Stripes locations, mainly under its Laredo Taco brand. Additionally, Susser Holdings controls a master limited partnership, Susser Petroleum Partners L.P. SUSP, one of the largest wholesale fuel distributors in Texas.

The transaction has been okayed by the boards of both companies but awaits regulatory and shareholder approval. We expect the buyout to conclude in the third quarter following which Energy Transfer will get the general partner interest and the incentive distribution rights in Susser Petroleum Partners and 50.2% of its common units, plus Susser Holdings' retail operations.

Should the deal go through, Energy Transfer Partners will be able to expand its existing network of 5,000 gas stations – mostly along the East Coast – that came with the $5.3 billion acquisition of Philadelphia-based refining and petroleum product marketing company Sunoco Inc. back in 2012.

Apart from scale advantages and increasing Dallas-based Energy Transfer Partners' retail reach, the Susser Holdings buy will help the partnership inch closer to creating a stand-alone gasoline retailing unit, separate from its core pipeline and terminals business. Over time, Energy Transfer Partners plans to drop all its retail gas stations into Susser Petroleum Partners, which will continue to be traded as an individual company on the NYSE with Sunoco Chief Executive Bob Owens heading the combined operation.

Under the terms of the agreement, Susser Holdings shareholders will receive either $80.25 in cash, or 1.4506 units of Energy Transfer Partners, or a combination of both, for each share they hold. This cash offer values Susser Holdings shares at a 41% premium to the pre-announcement closing price. Following the announcement, stocks of Susser Holdings and Susser Partners surged 36% and 22%, respectively, while units of Energy Transfer fell about 1%.

Energy Transfer Partners currently retains a Zacks Rank #5 (Strong Sell). A better-ranked stock in the energy pipeline sector would be Boardwalk Pipeline Partners L.P. BWP. It carries a Zacks Rank #1 (Strong Buy).