425: Sunoco LP Amends Parkland Acquisition Terms, Reveals Pro Forma Financials Showing Full-Year Loss

Sunoco LP has announced an amendment to its definitive agreement to acquire Parkland Corporation, adjusting funding and proration mechanics, while also releasing unaudited pro forma financial information that indicates a net loss for the combined entity for the year ended December 31, 2024.

Summary

• Sunoco LP, NuStar GP Holdings, LLC (SunocoCorp), and 2709716 Alberta Ltd. (Purchaser) entered into the First Amending Agreement with Parkland Corporation on May 26, 2025, modifying the Arrangement Agreement dated May 4, 2025.
• The amendment primarily adjusts funding mechanics for the transaction and the proration formula for consideration, with all other material terms remaining unchanged.
• Parkland commenced mailing its management information circular and proxy statement on May 28, 2025, which includes unaudited pro forma condensed combined financial information for Sunoco.
• The pro forma financials reflect the impacts of the Parkland Acquisition, Sunoco's acquisition of NuStar Energy L.P. (completed May 3, 2024), and Sunoco's sale of 204 convenience stores to 7-Eleven, Inc. (completed April 16, 2024).
• The Parkland Acquisition is valued at approximately $9.1 billion, including assumed debt, and is expected to close in the second half of 2025.
• Parkland shareholders are offered 0.295 SunocoCorp units and C$19.80 per Parkland share, with elective alternatives of C$44.00 cash or 0.536 SunocoCorp units, subject to proration.
• Sunoco has secured a $2.65 billion 364-day bridge term loan to fund the cash consideration for the Parkland Acquisition.
• The NuStar Acquisition involved the issuance of approximately 51.5 million common units (fair value ~$2.85 billion), assumption of ~$3.5 billion in debt, and ~$800 million in preferred units.
• The West Texas Asset Sale generated approximately $1.0 billion in proceeds and resulted in a $586 million gain ($442 million net of tax).

Sentiment

Score: 4

Explanation: The sentiment is mixed to slightly negative. While strategic acquisitions and asset sales demonstrate active portfolio management and growth ambitions, the pro forma net loss for the full year 2024, coupled with increased debt and potential dilution, presents a cautious outlook. The successful financing and strategic asset expansion are positive, but the immediate financial impact shown in the pro forma results is concerning.

Positives

• The amendment to the Arrangement Agreement indicates continued progress towards the completion of the significant Parkland acquisition.
• Sunoco has successfully secured a $2.65 billion bridge term loan, demonstrating financing capability for the cash component of the Parkland acquisition.
• The completed NuStar Energy L.P. acquisition significantly expands Sunoco's midstream asset base with approximately 9,500 miles of pipeline and 63 terminal and storage facilities.
• The West Texas Asset Sale generated substantial proceeds of approximately $1.0 billion and a significant gain of $586 million, improving liquidity.
• The amended fuel supply agreement with 7-Eleven, Inc. is expected to incorporate additional fuel gross profit, enhancing future revenue streams.
• The structure of SunocoCorp aims to provide economic equivalence and dividend parity for two years post-closing for Parkland shareholders, potentially facilitating shareholder approval.

Negatives

• The unaudited pro forma condensed combined financial statements show a net loss attributable to limited partners of $(262) million for the year ended December 31, 2024, after giving effect to all transactions.
• The Parkland Acquisition is a large transaction valued at approximately $9.1 billion, which will significantly increase Sunoco's debt burden and introduce new preferred units.
• The transaction involves potential dilution for existing Sunoco unitholders due to the issuance of additional units.
• Significant non-recurring transaction-related expenses are anticipated, including $230 million for the Parkland Acquisition and additional fees for the NuStar Acquisition.

Risks

• The completion of the proposed Parkland transaction is subject to various conditions, including regulatory approvals, court approvals, NYSE listing approval, and Parkland shareholder approval, which may not be obtained on anticipated terms or timing, or at all.
• There is uncertainty regarding the anticipated tax treatment, unforeseen liabilities, future capital expenditures, revenues, expenses, earnings, synergies, economic performance, indebtedness, financial condition, losses, prospects, business, and management strategies for the combined company.
• The anticipated benefits of the proposed transaction, including synergies and value creation, may not be realized or may not be realized within the expected time period.
• Potential litigation related to the proposed transaction could be instituted against Sunoco, Parkland, or their directors.
• Disruptions from the proposed transaction could harm Sunoco's or Parkland's business, including current plans and operations, and divert management's time and attention.
• There is a risk of potential adverse reactions or changes to business relationships with employees, suppliers, customers, competitors, or credit rating agencies resulting from the announcement or completion of the proposed transaction.
• The Amended Arrangement Agreement may be subject to further modification or adjustment.
• The parties' ability to satisfy their respective conditions and consummate the transaction is not guaranteed.
• Rating agency actions and Sunoco's and Parkland's ability to access shortand long-term debt markets on a timely and affordable basis could be impacted.
• Potential business uncertainty, including the outcome of commercial negotiations and changes to existing business relationships, could affect financial performance and operating results during the pendency of the proposed transaction.
• Certain restrictions during the pendency of the arrangement may impact Parkland's ability to pursue certain business opportunities or strategic transactions.
• Dilution may occur due to Sunoco's issuance of additional units representing limited partner interests in connection with the proposed transaction.
• The transaction may incur higher fees, costs, and expenses than anticipated.

Future Outlook

The Parkland Acquisition is expected to close in the second half of 2025, subject to shareholder and regulatory approvals. Sunoco intends for SunocoCorp unitholders to receive dividend equivalents consistent with Sunoco unitholders for two years post-closing. The pro forma financial information provides an illustrative view of the combined entity's potential performance, but actual results may differ due to various risks and uncertainties, including integration success and realization of anticipated synergies.

Management Comments

• Sunoco and Parkland announced that the parties entered into a definitive agreement for the Parkland Acquisition.
• Sunoco has secured a $2.65 billion 364-day bridge term loan for the proposed cash consideration of the Parkland Acquisition.

Industry Context

This announcement reflects a strategic consolidation within the energy midstream and retail fuel distribution sectors. Sunoco's acquisition of NuStar significantly expands its pipeline and terminal infrastructure, aligning with a focus on core midstream assets. The divestiture of convenience stores to 7-Eleven, Inc. suggests a streamlining of its retail operations, potentially allowing Sunoco to concentrate on its fuel supply and wholesale distribution strengths. The Parkland acquisition further expands Sunoco's footprint, indicating a broader trend of scale and integration in the North American energy market to achieve operational efficiencies and market dominance.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry benchmarks, comparable companies, or projects. The pro forma financial information is presented to illustrate the combined entity's financial position and results of operations, rather than to assess performance against industry standards.

Corporate Governance

Legal Proceedings

• Potential litigation relating to the proposed transaction that could be instituted against Sunoco, Parkland, or their directors is identified as a risk factor.

Related Party Transactions

• Sunoco intends to execute certain affiliate transactions with NuStar GP Holdings, LLC, which is expected to be renamed SunocoCorp LLC. SunocoCorp would be a publicly-traded Delaware limited liability company and is expected to hold limited partnership units of Sunoco that are economically equivalent to Sunoco's publicly-traded common units.

Stakeholder Impact

• Shareholders of Parkland Corporation will receive consideration in the form of SunocoCorp units and/or cash, subject to proration, and will vote on the Arrangement Resolution.
• Existing Sunoco LP unitholders may experience dilution due to the issuance of new units for the Parkland acquisition.
• Employees of both Sunoco and Parkland may be impacted by integration efforts and potential changes in business relationships.
• Suppliers, customers, and competitors may see changes in business relationships as a result of the combined entity's operations.
• Creditors will be impacted by the significant increase in Sunoco's debt levels due to the Parkland acquisition and associated financing.

Next Steps

• Parkland Corporation will continue mailing its management information circular and proxy statement to shareholders.
• Parkland shareholders will need to approve the Arrangement Resolution at the Company Meeting.
• Sunoco and Parkland will seek customary regulatory and stock exchange listing approvals.
• The Parkland Acquisition is expected to close in the second half of 2025 upon satisfaction of closing conditions.
• SunocoCorp intends to file relevant materials with the SEC, which may include a registration statement containing a preliminary prospectus.

Key Dates

Recommendation

Keywords

Sunoco LP, Parkland Corporation, Acquisition, Merger, SEC Filing, Form 8-K, Pro Forma Financials, NuStar Energy L.P., Asset Sale, Midstream, Fuel Distribution, Convenience Stores, Energy Sector, Corporate Finance, Debt Financing, Shareholder Approval