Energy Transfer Equity LP (ETE) has held talks about the possibility of divesting gas station and convenience store operator Sunoco LP. Sunoco operates about 900 convenience stores and fuel outlets in eight U.S. states.
According to a report by Reuters, the discussions were preliminary and held earlier this year after at least one interested company approached Energy Transfer with interest. Logical buyers for Sunoco’s gas station network could include Canada’s Alimentation Couche-Tard Inc., Valero Energy Corp. or Tesoro Corp., sources familiar with the situation told Reuters.
The talks were likely a result of Energy Transfer looking to beef up its balance sheet after a drop in oil prices made its pending acquisition of Williams Companies Inc. more financially burdensome than previously thought.
If a sale were to occur, it would involve Energy Transfer’s ownership of the general partnership of Sunoco, which could be valued at more than $2 billion. A 36.4% stake in the limited partnership in Sunoco owned by Energy Transfer Partner LP, a master limited partnership, would also have been divested.
An Alimentation Couche-Tard spokeswoman, Karen Romer, said the company was always looking for acquisitions, but would not comment on whether the company had approached Energy Transfer with an interest in Sunoco.
Disagreements over Sunoco’s valuation halted the discussions, Reuters reported.
Although new interest could revive sales talks.
Williams in September was valued at $33 billion in stock and cash. Since then, pipeline company stocks have been pummeled due to oil price drops. Williams’ implied value is now $14 billion. As a result, the $6 billion cash portion of Energy Transfer’s deal with Williams, which is scheduled to close in the first half of 2016, has gone from a minor consideration to a major portion, nearly half of the deal’s value. A sale of Sunoco would help Energy Transfer recoup much of that cash, Reuters reported.
Energy Transfer disclosed this week that a minority of its shareholders, including its billionaire chief executive Kelcy Warren, would receive convertible units in the company in exchange for foregoing some of their dividends for up to nine quarters.
Williams responded by arguing that it had offered to work with Energy Transfer to develop a way to finance the deal that is more beneficial for both companies investors.
Former Energy Transfer Chief Financial Officer Jamie Welch, who was fired last month, sued the company this week for breach of contract, saying he believes his “termination was motivated by an agenda unrelated” to his performance. The company has not made any public statements about why Welch was terminated.