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Tuesday, May 13, 2014

CST Brands to Close 117-Store Sale in Q4

Source: Convenience Store News
By Brian Berk

SAN ANTONIO -- CST Brands Inc. will accept bids through mid-June and expects to close on its sale of 117 Corner Store locations by the fourth quarter, Chairman and CEO Kim Bowers said Tuesday during the company's 2014 first-quarter earnings call.

As CSNews Online previously reported, San Antonio-based CST Brands retained NRC Realty & Capital Advisors to sell these properties, which have been identified as smaller in square footage and below the company's overall store average from an inside sales perspective. Several of the stores could be dropped down into CST Brands' U.S. wholesale distribution business.

Although Bowers did not specifically say if Energy Transfer PartnersĀ LP's (ETP) pending acquisition of Susser Holdings Corp. would increase the price for its property sale, she did note that she was pleased ETP saw the "embedded value" that retail operations can provide. "[The transaction] was certainly at a valuation we like to see and shareholders would like to see," Bowers stated during the call.

Once the deal closes, ETP, a master limited partnership (MLP), will have purchased Susser Holdings, Sunoco Inc. and Mid-Atlantic Convenience Stores in the past two years. When asked by Bonnie Herzog, managing director at Wells Fargo Securities LLC, on the earnings call if CST Brands would consider converting its company into an MLP structure, Bowers responded that the retailer's board has talked about an MLP and "it's an attractive structure." She did not elaborate further.

To be legally classified as an MLP, a partnership must derive at least 90 percent of its cash flows from real estate, natural resources and commodities. The main advantage of an MLP structure is the partnership does not pay taxes from its profits. The money earned is only taxed when unitholders receive distributions.

FOODSERVICE DELIVERS

In regards to CST Brands' first-quarter financials, Bowers noted that foodservice was the rising star of the quarter. This segment's sales -- led by sales of Corner Store's proprietary kolaches and whoopie pies -- increased 3 percent year over year.

The company is so impressed with its foodservice operation that the segment will be expanded considerably throughout this year. Bowers is especially excited about two new offerings launching this summer intended for the late-afternoon daypart: a sriracha club puff pie and a barbecue pulled pork sandwich.

Companywide, CST Brands -- which celebrated its