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UPDATE: The Benchmark Company Downgrades Susser Petroleum Partners LP On Valuation

Dwight Einhorn

In a report published Wednesday, The Benchmark Company analyst Ronald Bookbinder downgraded the rating on Susser Petroleum Partners LP (NYSE: SUSP) from Buy to Hold, but reiterated the $47.00 price target.

In the report, The Benchmark Company noted, “We have downgraded shares of Susser Petroleum Partners to Hold from Buy, as the price per unit has exceeded our price target and as it is still unclear as to how much Susser Petroleum Partners will pay for the assets of Susser Holdings and Sunoco retail and wholesale operations.

"As part of the recently announced acquisition of Susser Holdings (SUSS) by Energy Transfer Partners (ETP), the Company will begin to accelerate its drop downs. Petroleum Partners will purchase all of the Susser Holdings retail operations and all of the Sunoco retail and wholesale operations from Energy Transfer Partners for cash and units, not presently in our model. It is still unclear as to the value and or multiple it will pay for the assets and how many shares will be issued. We believe that Energy Transfer Partners, who will own over 50% interest of SUSP, and its affiliated Energy Transfer Equity, which will own SUSP's GP, will want to ramp up distributions as quickly as possible, especially from its current conservative 1.27 distribution coverage ratio.

"We are concerned, though, with Energy Transfer Partners gaining control of Susser Petroleum Partners, value could be transferred from Susser Petroleum unit holders to Energy Transfer Partners unit holders, if Energy Transfer Partners charges too much for the assets that Susser Petroleum will acquire. Until we get more clarity, we have moved to the sidelines with a Hold rating, and we maintain our price target of $47.”

Susser Petroleum Partners LP closed on Tuesday at $47.32.

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