Susser Petroleum Partners, LP: IPO of a Master Limited Partnership

This case explores Susser Holdings Corporation (SHC), a Texas-based company with two businesses: operating large-footprint convenience stores that sold fuel, food, and other merchandise; and fuel distribution—both to its own stores and to such companies as Conoco, Chevron, Citgo, Exxon, Mobil, Phillips 66, Texaco, and Valero. In 2012, Sam Susser, SHC’s president and CEO, was under pressure to create value for SHC’s shareholders and an exit for Wellspring Capital Management, LLC (Wellspring). Before its initial public offering (IPO) in 2006, SHC had accepted a private equity investment from Wellspring, but with the onset of the Global Financial Crisis, Wellspring didn’t have an opportunity to exit its investment at a good return. In 2011, Susser had turned down an acquisition offer from a large publicly traded retailer for a price of approximately $30 per share—he thought the offer was too low, but his decision left Wellspring still seeking an exit.

Susser began formulating a plan to carve out SHC’s wholesale fuel distribution business to a master limited partnership (MLP) in an IPO, which would be called Susser Petroleum Partners (SUSP). On the one hand, he believed the value created from the MLP and the continued growth in the business would substantially exceed the value from the acquisition offer. Further, if the MLP was well received by the market, it would be an attractive vehicle to fund SHC’s future growth.

On the other hand, it would be a complicated transaction, and Susser would have to convince his board and Wellspring that it was the right strategic direction for SHC. Although MLPs had frequently been used for pipeline and other energy-related assets, SUSP would be the first MLP of a non-refining wholesale fuel supplier. How would investors react to an MLP based on a wholesale fuel distribution business? What was the value of the proposed SUSP IPO? Would it create sufficient value for SHC’s shareholders and for Wellspring to exit its investment at an attractive return?