Sunoco Inc. is being acquired for $5.3 billion by a Texas pipeline
company, the latest turn in the dramatic transformation of the iconic
126-year-old Philadelphia oil business, the Philadelphia Inquirer reports today.
Energy Transfer Partners L.P., a Dallas pipeline company, announced
Monday it has entered into a definitive merger agreement to acquire
Sunoco for a combination of cash and stock. The buyer will pay about
$50.13 a share, or a 29 percent premium above Sunoco’s average 20-day
closing price.
Sunoco, which has 4,900 retail fuel outlets, and its pipeline
affiliate, Sunoco Logistics Partners L.P., will maintain their
headquarters in the Philadelphia area. ETP will own Sunoco’s general
partner interest in Sunoco Logistics as well as Sunoco’s 32.4 percent
interest in Sunoco Logistics’ partnership units.
Brian MacDonald, who became Sunoco’s chief executive only two months
ago and will retain a senior management position in the merged company,
said that he expects minimal disruption for Sunoco employees. ETP does
not own any retail outlets or crude-oil pipelines — Sunoco Logistics’
specialty — and the merger was described as a “bolt-on acquisition.”
“The two primarily businesses of Sunoco, the retail gasoline business
and the logistics business, those are businesses that Energy Transfer
is not in today,” MacDonald said in an interview. “So the operating
management and the substantive teams in those businesses will stay in
place.”
Though most of the $70 million in synergies envisioned by the merger
will come from new commercial opportunities, MacDonald acknowledged
“there will be some corporate overhead reductions.”
In a statement he read to investment analysts during a morning
conference call, MacDonald said: “Our commitment to the area also
remains unwavering. We will continue to have a key presence in the
region.
“And as part of a stronger company with increased stability and scale
to capitalize on growth opportunity, we believe Sunoco will be even
better positioned to return economic benefit to the Philadelphia region
and to the other areas of operation.”
Sunoco has been transforming itself for several years, and under
former chief executive and current chairwoman, Lynn Elsenhans, had
divested its last remaining manufacturing businesses, producing
chemicals, metallurgical coke and refined petroleum products. Last fall,
it announced plans to exit the refining business that had been a
central focus of the company for more than a century.
Sunoco said its plans remain unchanged to pursue a joint venture with
the Carlyle Group to operate its Philadelphia refinery, its last
operating refinery. Sunoco says it will shut down the refinery on Aug. 1
if it is unable to consummate a deal with the private equity firm.
While Sunoco is known in the Northeast for 4,900 retail fuel outlets
and its refineries, it was the company’s pipelines, storage facilities
and fuel terminals that are most attractive to Energy Transfer.
Energy Transfer’s assets are concentrated primarily in natural-gas
pipelines along the Gulf Coast, and it has expressed a desire to
diversify into transporting crude oil and refined fuels, areas where
Sunoco Logistics has an expertise. Sunoco Logistic’s pipelines tie
together its former refinery network in Philadelphia, Ohio and Oklahoma
to crude-oil fields in Texas.
Analysts suggested that ETP would likely sell off Sunoco’s retail
operation, since it is not a natural fit with Energy Transfer’s
corporate ownership structure, a master limited partnership, or its core
logistics business.
