Sunoco acquires NuStar for $7.3 billion

Last Updated: 25. Januar 2024By

Sunoco LP, a US-based gas station operator, is embarking on the acquisition of pipeline and gas station company NuStar Energy LP – with a price tag of around $7.3 billion. This move aims to diversify the business and also acquire an important part of its supply chain.

Immediately after the announcement, NuStar’s stock price jumped by 19%, while Sunoco’s shares took a dive (-7%).

Sunoco – A Tradition-Rich Gas Station Giant Before we delve into the details of the deal, let me introduce you to the buyer Sunoco LP: Behind Sunoco is a US-based company for petroleum products and services with its headquarters in Dallas, Texas. The company’s history dates back to 1886 when The Sun Company was founded. Since then, the company has grown to become one of the leading providers of fuels and petrochemical products worldwide.

The company operates refineries and pipelines to transport and further process crude oil and other petrochemical products. Sunoco is also able to sell its products to end consumers through its chain of gas stations (approximately 10,000 in the US).

Sunoco Offers Over $7 Billion for NuStar Now, Sunoco wants to expand its business and is offering NuStar’s common shareholders 0.4 Sunoco shares for each NuStar common share. This represents a premium of 31.9% over the last closing price before the acquisition. Including assumed debt, the stock deal has a value of approximately $7.3 billion.

The companies stated that the deal was approved by the boards of directors of both companies.

The merger is expected to generate synergies of $150 million by the third year after the deal is completed. The target is to finalize the transaction in the second quarter of 2024.

NuStar with its Large Pipeline Network The background of the deal: The acquisition is intended to expand Sunoco’s crude oil transportation and storage capabilities, as it is one of the largest independent fuel retailers in the US. NuStar Energy operates a pipeline network of approximately 15,288 km and 63 terminals and storage facilities. These facilities store and distribute various substances, including crude oil, refined products, renewable fuels, ammonia, and specialty liquids. NuStar’s facilities, which include pipelines and terminals for oil, chemicals, ammonia, and other fuel-related products, are mainly located in the Midwest and on the West Coast.

In the last fiscal year, which ended on September 30 for NuStar, the company generated a net profit of $200 million on a revenue of $1.68 billion. For comparison: The buyer Sunoco had a profit of $397 million on a revenue of $25.72 billion.

Acquisition Broadens Sunoco’s Business According to Sunoco, the acquisition aims to diversify the business, increase its size, and take advantage of the benefits of vertical integration through the merger of two stable companies.

Therefore, the purchase of NuStar is expected to help Sunoco expand its business. This means utilizing more of its own terminals and optimizing fuel supply costs. Additionally, Sunoco can expand its presence in other parts of the US.