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Convenience Retail Still Going Strong as 7-Eleven Adds 1,108 Stores for $3.31 Billion

Sunoco Exiting C-Store Business, Launches Sales Process for Remaining C-Sores in North and West Texas, New Mexico and Oklahoma
April 6, 2017
Sunoco LP (NYSE: SUN) is getting out of the convenience store business. And that's good news for 7-Eleven.

The energy company agreed to sell a majority of its gas station/convenience stores to 7-Eleven Inc. for $3.31 billion in cash. 7-Eleven is owned by Tokyo-based Seven & i Holdings Co. Ltd.

The sale includes 1,108 convenience stores in 19 geographic regions, primarily located along the East Coast and in Texas, giving it entry into Houston for the first time.

The acquisition price was calculated based on the cash flow for each individual store and the price averages out to about $2.98 million/store.

As part of the transaction, SUN will enter into a 15-year take-or-pay fuel supply agreement with a 7-Eleven subsidiary, under which SUN will supply approximately 2.2 billion gallons of fuel annually.

By acquiring the bulk of SUN’s c-store and gasoline retail business, 7-Eleven will expand its store network while also improving profitability, according to a Seven & i filing.

7-Eleven is aiming to achieve average daily merchandise sales per store of $5,000 and to operate 10,000 stores by the fiscal year ending Feb. 29, 2020. This deal with Sunoco puts it at 9,815 in the US and Canada.

Sunoco is still looking for a buyer to take another 200 convenience stores it owns in North and West Texas, New Mexico and Oklahoma. SUN has retained JP Morgan to market the properties, the same firm that advised in the 7-Eleven deal.

Even though Sunoco operated more than 400 more stores in 2016 than in 2015, revenue for the business declined from $8.27 billion in 2015 to $7.7 billion in 2016. Sunoco attributed the drop-off to lower gasoline prices and increased expenses from operating a larger chain.

Sunoco lost $27 million on its retail business last year after recording a profit of $172 million in 2015. The loss was attributed mainly to a $130 million interest payment due last year.

After getting regulatory clearances and meetiing customary closing conditions, the sale to 7-Eleven is expected to close by the fourth quarter of 2017.

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