Sunoco-Wawa merger? (Updates)
Could Sunoco buy Wawa to meet CEO Elsenhans goal of "improving our convenience" store chain?
Sunoco-Wawa merger? (Updates)
Joseph N. DiStefano
As my colleague Andy Maykuth points out here, Sunoco boss Lynn Elsenhans, who's sold or shut several of Sunoco's lower-profit oil refining, chemical, trucking and (soon) steel-coke operations, is more interested in selling Cokes and smokes, along with its logistics and biofuels units.
"The retail business has been a consistent performer for Sunoco, generating steady income and good return on capital," Elsenhans told investors at a Barclays Capital energy-and-power investors' conference yesterday. "We believe we can unlock even additional values, through the growth of the network, and by improving our convenience offer."
If Sunoco wants more and bigger convenience stores, why not buy Wawa? "That is the first thought that came to my mind," says a Philadelphia investor whose family has done business with Sunoco's founding Pew family and Wawa's controlling Wood family over the years. "Wawa knows the model because they created it. It's a very good model." Though if the Woods wanted to sell, "this would be the year to sell because of the current cap gains rate."
Today's 15% capital-gains tax "sunsets at the end of 2010," notes Scott Isdaner, partner at Isdaner & Co. accountants in Bala Cynwyd. The tax on company-sale profits, like other capital gains, "would go back up" to 20%, or possibly more, unless Congress acts soon. So, generally, "it's time to accelerate the sale of your business, if you're looking to sell, and the price is right," says Isdaner.
What's Wawa worth? A slightly larger chain, Iowa-based Casey's General Stores, with $4.6 billion in yearly sales at more than 1,000 mostly smaller stores, is right now fielding competing $1.6 billion bids from Japanese-owned 7-11 and Canada's Alimentation Couche-Tard (Food Up-Late).
Wawa, with 550 stores and somewhere north of $4 billion in sales, according to Convenience Store News and Progressive Grocer, might fetch as much - or more, if it's expected to grow faster than Casey's. Sunoco, with $28 billion in yearly sales but a modest $4.2 billion share value, is, as Elsenhans notes, sitting on "about $1.5 billion of cash" and has good credit to borrow more.
So Wawa could be worth as much as half of what Sunoco is trading for on today's stock market. In that case, Wawa could buy Sunoco, if the Woods want to keep their private trusts going, and are willing to borrow or invest aggressively to digest the larger but slower-growing fuel retailer.
No immediate coment from Sunoco or Wawa.
Sunoco, if you do buy them, please keep the Wawa name and branding in place. "Sunoco Hoagie-fest" just won't sound right.— cgrock- I am all for it if it will stop WaWa from closing all their center city stores... I suppose only stores with 80 parking spaces and 30 gas pumps are worth running anymore. God-forbid a customer arrives ON FOOT!— nittany4
- If they sell, I hope we won't lose the things that make Wawa special. Genuardi's was never the same after Safeway bought it.— Echo
I go to 7-11.....better food, place smells better and very friendly people (sic)- Unfortuanately, I live in Birmingham now, but I really miss Wawa. If Sunoco takes it over, they can do noting but bring it down. How do you improve on perfection? Philly, you don't know what you have until you leave it behind. Philly is the greatest place in the world.— philpa
- If this happened the only logical change would be to put some sunoco branding on the pumps. Changing anything else about wawa's super store model would be suicide.
Don't think I could live without wawa. I'm so addicted to their green tea that the distance to the nearest store was honestly a consideration when searching for the home I currently live in. But it will never be what it was back in the olden days - when they cut the meat for your hoagie fresh when you ordered it and you could get a cheesesteak or bacon egg and cheese from the grill at 2am.— 92gli - So, are you trying to tell me that large companies try to avoid paying taxes? Who then is going to pay for our men and women in harm's way over in the Middle East and Afghanistan? Seems very un- American. Anyway, Wawa would be better off merging with Primo's, then perhaps they could make a half decent hoagie again (its been about 20 years since...). Don't think Sunoco is going to make the gasoline taste any better though.— bobcitydoc
- doowaditty, not sure you understand what (sic) means.— Echo
- wawa is way better than 7-11. better coffee, better service. not even close.
- If Sunoco takes over Wawa they will just drag them down to Sunoco's dumpy overpriced snacks and gasoline. Why is it the closest refinery to Philly (Sunoco)has the most expensive gas? And doowaditty, you must have a personal beef with Wawa (did u get fired, caught stealing?) cause saying that 7-11 is superior to Wawa by having better food and smells better, you need to get your senses checked.— Borkey
- The Canadian chain is Couche-Tard. Roughly translates as 'up late'.— Politburo
- WAWA ... DONT SELL!!!!!— displaced26
- Life would stop functioning in this area if something happened to Wawa.— Chuck From Blue Bell
wawa jumped the shark long ago, this would just be icing on the cake.— TwinkleToes- sunoco definitely has cheaper gas then bp...exxon..lukoil etc...u must live in west philly where they tax people up....in the northeast we are at 2.51— popoff
- displaced26 and Chuck From Blue Bell said it all! (And doowaditty made an obvious joke. Geez, lighten up!)
— Catch22 - sunoco will ruin wawa and we'll be begging sheetz to come to town. wawa buying sunoco would be good for the region.— dreinterests
bobcitydoc... kys.- I'm with Borckey, I will drive WAY out of my way to avoid a 7-11 and go to a WAWA, the Woods family knows how to run a store!!!— Edn
- Edn, that's because the Woods family and the rest of the Wawa company, unlike 7-11 and other mini-marts, hires ENGLISH SPEAKING, LITERATE AMERICANS!— s1360m
- Wawa should buy Sunoco. Sunoco would only ruin Wawa.— notsofast
