A New Form Of An MLP IPO

What is happening is a filing of a registration statement which will allow an initial public offering through the formation of a master limited partnership.  This MLP will operate substantially all of Susser Holding’s legacy wholesale fuel distribution business.  We would not normally cover a company of this size, but this move to create a new MLP is one that we think investors will pay attention to because of what is generally a high payout of income and a return of capital.

The goal is to unlock shareholder value and the company said that the wholesale business is just not being recognized in the market today.  Of course that is self-serving, but that is to be expected.  The move is also said to de-leverage the convenience store portion of its business.  It is also expected to reduce the company’s cost of capital and further diversify capital access as part of its growth strategy.

The report notes, “Susser Holdings would own the general partner of the new entity, Susser Petroleum Partners LP, as well as all of the MLP incentive distribution rights and a majority of its units representing limited partner interests.  At the time of the IPO Susser Holdings expects to receive a cash distribution from the MLP which will be equal to the net IPO offering proceeds.

After Susser receives the proceeds, it intends to construct or acquire new convenience stores and to pay down debt.  Susser has approximately 1,100 company-operated or contracted locations named Stripes with over 540 convenience stores in Texas, New Mexico and Oklahoma. It also supplies branded motor fuel to approximately 565 independent dealers through a wholesale fuel division.

Susser closed down 0.9% at $32.92 with a $680 million market capitalization rate; its 52-week range is $15.45 to $33.72.

JON C. OGG