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Why the ETP–Susser deal could mean $70 million in annual synergy

Avik Chowdhury

Energy Transfer Partners could acquire Susser for $1.8 billion (Part 5 of 5)

(Continued from Part 4)

The proposed Energy Transfer Partners–Susser Holdings deal

The merger of Susser (SUSS) and Energy Transfer Partners (ETP) would create a more diversified retail platform and would provide a structure for the complete separation of the retail business from ETP. The new unit would operate under “SUSP” as an MLP. Through the acquisition, the Sunoco brand would have access into Texas and the neighboring states, which would present opportunities for additional margins through expansion of dealer and distributor channels.

Total synergy opportunities are expected to exceed $70.0 million annually, as displayed in the graph above. The synergies are expected to arise from three levels: improved economies of scale, information technology systems cost advantage, and operational synergies related to personnel. If the merger transaction between ETP and Susser goes through, ETP’s Sunoco Logistics will be able to capitalize on Susser’s fuel sourcing expertise over a much larger portfolio.

The combined entity would have a total of ~6,400 sites of dealers, distributors, and company-owned sites. Together, they would sell ~6.3 billion gallons of motor fuels for total merchandise sales of $1.68 billion. The entity would have a $750 million margin from its fuel business and ~50% of sales from its retail operations. The combined entity would have an EBITDA of ~$500 million.

Robert W. Owens, CEO of Sunoco Logistics, said in the conference call of the merger agreement, “Today, for the Sunoco business, about 65% of our gross profit dollars come from fuel. Susser is almost the exact opposite, where today they are at 35%. The new entity, we’re 50-50 fuel and non-fuel, which we believe creates a much stronger combined entity. The very bottom line, you see EBITDA numbers for 2013. In the case of Sunoco, that did not include a full-year of MACS. And for Susser, these numbers do not include their recent Sac-N-Pac acquisition. So, the future for both standalone was bright and, together, even better.”

Energy Transfer Partners LP (ETP) and Susser Petroleum Partners LP (SUSP) are master limited partnerships operating in the midstream energy space in the wholesale and retail businesses. Other major companies operating in the same sector include Ferrellgas Partners LP (FGP) and Kinder Morgan Partners LP (KMP), which are also components of the Alerian MLP ETF (AMLP), Global X Funds MLP ETF (MLPA), or Yorkville High Income MLP ETF (YMLP).

To learn more about important news and releases that affect your MLP investments, see Market Realist’s Master Limited Partnerships page.

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