Sunday, August 5, 2012

Susser Partners to Monetize Petroleum Affiliate

Susser Holdings purchased Town & Country Food Stores in 2007, then re-branded the stores as Stripes.  Susser Holdings is an affiliate of Wellspring Capital Management LLC, a private equity underwriter (PEU).

Town & County sold out a year after Hirschfeld Steel became an affiliate of Insight Equity, another private equity firm.  Insight turned Hirschfeld into a limited partnership, where the tax obligation is passed on to partners.

Susser plans to do the same with their petroleum division, slated for an independent public offering as Susser Petroleum Partners..  Susser Petroleum's Partners will sell up to $200 million of their holdings.

Susser Petroleum unit holders will be second class citizens, much like those recently buying into The Carlyle Group. 

Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in "good faith" and will not be subject to any other standard under applicable law. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or the unitholders whatsoever. These standards reduce the obligations to which our general partner would otherwise be held.
Susser Petroleum's S-1 states:

As a result, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and SHC and our general partner, on the other hand.

By purchasing a common unit, the purchaser agrees to be bound by the terms of our partnership agreement, and each unitholder is treated as having consented to various actions and potential conflicts of interest contemplated in the partnership agreement that might otherwise be considered a breach of fiduciary or other duties under applicable state law.  
Wellspring recently monetized 5 million shares of the parent, Susser Holdings via a $36 per share secondary offering.  The secondary initially looked to go at $20 per share.  Susser's stock soared, garnering Wellspring an extra $80 million 

It looks like Susser executives learned well from their time as a PEU.  The public is invited to make them and their partners wealthier.