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 While these discussions were preliminary, they underscore Energy
Transfer's efforts to bolster its balance sheet after a plunge in
oil prices made its pending acquisition of Williams more financially
burdensome than it previously envisioned.
Energy Transfer held conversations to sell Sunoco earlier this year
after it was approached by at least one interested company, the
sources said this week, who asked not to be identified because the
deliberations were confidential.
Energy Transfer and Sunoco did not respond to requests for comment.
The potential sale would have involved Energy Transfer's ownership
of the general partnership of Sunoco, which could be valued at more
than $2 billion, the people said.
A 36.4 percent stake in the limited partnership in Sunoco owned by
Energy Transfer Partner LP <ETP.N>, a master limited partnership,
would also have been divested, the people added. Sunoco has a market
capitalization of $3.3 billion.
The discussions about a sale never advanced because of disagreements
over Sunoco's valuation, the people said, cautioning that Energy
Transfer may choose to revisit the potential divestment if it
receives new interest.
Sunoco operates about 900 convenience stores and fuel outlets in
eight U.S. states, offering merchandise, food service and motor
fuel. It also distributed about 7.6 billion gallons of motor fuel
across the United States in 2015.
Logical buyers for Sunoco's gas station network could include
Canada's Alimentation Couche-Tard Inc <ATDb.TO>, Valero Energy Corp
<VLO.N> or Tesoro Corp <TSO.N>, sources said.
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. Tesoro also declined to comment, while Valero
did not respond to a request for comment.
Energy Transfer's acquisition agreement with Williams in September
valued the latter at $33 billion in stock and cash. Since then,
pipeline company stocks have been pummeled as their oil exploration
and production clients suffer from low oil prices.
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In the wake of the selloff, the implied value of the deal is now $14
billion. As a result, the $6 billion cash portion of ETE'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.
Energy Transfer is not able to walk away from the deal, under its
current terms. But Williams shareholders still need to vote to
approve the deal. Williams has not yet set a date for the
shareholder vote.
In another move to raise cash, 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.
(Reporting by Mike Stone in New York; Editing by Bernard Orr)
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