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Based in Houston, TX, Susser Petroleum Partners LP (SUSP) scheduled a $190 million IPO with a market capitalization of $440 million at a price range mid-point of $20 for Thursday, September 20, 2012.

Seven IPOs are scheduled for the week of September 17. Full IPO calendar available here.

SUSP S-1 filed September 10, 2012.

Manager / Joint Managers: BofA Merrill Lynch/ Barclays/ Wells Fargo / UBS.

Co Managers: RBC Capital / Raymond James/ BMO Capital / Baird/ Janney Montgomery.

SUMMARY

SUSP is a Delaware limited partnership formed by Susser Holdings Corporation, or SHC, to engage in the primarily fee-based wholesale distribution of motor fuels to SHC and third parties.

The cash payout % estimate looks healthy at 8.8%, culminating in an 87% payout ratio for the 12 months ending September 2013.

But SUSP's margins are razor thin. For the six months ended June 2012, margins were the following: gross margin, 1.3%; profit margin: .8%; EBITDA, 1%.

IPOdesktop believes SUSP may have a difficult time financing growth after it pays out most of its available cash. Yes, the S-1 filing indicates that SUSP can rely on its parent Susser Holdings Corporation to finance future growth, and that may happen, or may not happen.

CONCLUSION

Because short term interest rates are very low, IPOdesktop believes the SUSP IPO can be successful if priced below the price range mid-point of $20. If so, then SUSP could edge up a little over time with most of the demand coming from the retail sector.

IPOdesktop is therefore neutral on the SUSP IPO.

BUSINESS

SUSP is a Delaware limited partnership formed by Susser Holdings Corporation, or SHC, to engage in the primarily fee-based wholesale distribution of motor fuels to SHC and third parties.

SHC operates over 540 retail convenience stores under its proprietary Stripes convenience store brand, primarily in growing Texas markets. Stripes is the largest independent chain of convenience stores in Texas based on store count and retail motor fuel volumes sold.

Upon the completion of this offering, SHC will purchase all of its motor fuel from SUSP.

SUSP believes it is the largest independent motor fuel distributor by gallons in Texas, and among the largest distributors of Valero (VLO) and Chevron (CVX) branded motor fuel in the United States. In addition to distributing motor fuel, SUSP also distribute other petroleum products such as propane and lube oil, and receive rental income from real estate that SUSP lease or sublease.

SUSP purchases motor fuel primarily from independent refiners and major oil companies and distribute it throughout Texas and in Louisiana, New Mexico and Oklahoma.

CASH DISTRIBUTION POLICY

SUSP plans on a minimum quarterly distribution of $0.4375 per common unit and subordinated unit, which is an annual $1.75 rate, or an 8.8% annual rate at the price range mid-point of $20.

USE OF PROCEEDS

SUSP expects to net $173 million from its IPO. Proceeds are allocated as follows:

• Distribute $27.0 million to SHC (the parent) as reimbursement of certain capital expenditures incurred with respect to the assets contributed to us in connection with this offering; and

• Purchase $147.3 million of U.S. Treasury or other investment grade securities, which will be assigned as collateral to secure a new $147.3 million term loan that will be fully guaranteed by SHC …

… the proceeds of which will be used to make a $147.3 million distribution to SHC to finance in part the acquisition of the assets transferred by SHC to SUSP in connection with this offering.

• In addition, SUSP will draw $2.4 million in borrowings under a revolving credit facility in order to pay transaction expenses associated with entering into the term loan and the revolving credit facility.

Source: IPO Preview: Susser Petroleum Partners LP