Sunoco (NYSE:SUN) Lets Go of Most Convenience Stores in $3.3 Billion Deal with 7-Eleven

As it shifts its focus to its fuel supply business, U.S. petroleum and petrochemical manufacturer Sunoco LP (NYSE:SUN) announced that it will divest most of its convenience stores to 7-Eleven Inc. in a deal valued at $3.3 billion.

The transaction covers about 1,110 convenience stores in 19 regions across the U.S. East Coast, and includes a take-or-pay fuel supply agreement with 7-Eleven, under which Sunoco will supply the former with approximately 2.2 billion gallons of fuel over a 15-year period.

The supply deal will guarantee yearly payments to Sunoco, and provide the continued use of its brand by 7-Eleven.

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The company expects to complete the deal in the fourth quarter of 2017, subject to regulatory approvals and customary closing conditions.

Proceeds from the transaction will be used to repay debt and for general partnership purposes, according to the statement.

Separately, Sunoco initiated a sales process for about 200 convenience stores in New Mexico, Oklahoma and Texas.

“The sale of these retail assets to 7-Eleven is the beginning of an exciting evolution for SUN into a premier nationwide fuel supplier,” Sunoco President and CEO Bob Owens said.

Change Of Focus

Sunoco seeks to be a major consolidator in the domestic wholesale fuel business, targeting a network of over 8,900 locations of distributors, third-party dealers and other commercial customers.

Last year alone, the company completed the purchase of several fuel distribution businesses.

In June, the company bought from Kolkhorst Petroleum, Inc. the “Rattlers” retail store convenience assets and wholesale fuel business in Texas, which included 14 locations and fuel supply contracts.

Sunoco followed this transaction in August with the $167.7 million takeover of Emerge Energy Services LP’s (NYSE: EMES) fuel business, which covered two processing plants with attached refined product terminals in Alabama and Texas.

In October, meanwhile, the company paid about $53 million to acquire the convenience store assets and wholesale fuel business from Denny Oil. This included six locations and fuel supply contracts.

Full-Year Results

Sunoco recorded total revenues of $15.7 billion in the 12 months ended 2016, representing a 15% decrease on a yearly basis.

The company also swung to a loss of $406 million, or $5.26 per share, in 2016 from a year-ago profit of $87 million, or $1.11 per share.

Adjusted EBITDA came at $665.3 million, down from $715.3 million registered in 2015.

Key Stakeholders

Sunoco’s top shareholder is OppenheimerFunds Inc., which held 13.26 million shares in the company valued at $356.5 million as of the end of 2016.

Another key shareholder is Citigroup Inc., which owned 3.38 million shares in the company valued at $90.8 million as of the end of the same period.

Sunoco’s shares rose by more than 20% following the announcement and closed at $28.69.