Delek to sell Mapco stores to Chilean energy giant for $535 million, El Dorado refinery not part of deal

Delek U.S. Holdings, which owns the former Lion Oil refinery in El Dorado and refined products terminals in Little Rock, announced Monday (Aug. 29) it is selling its Mapco retail stores in Arkansas and six other states to the Chile-based Copec, S.A.

According to the terms of the deal, Copec will acquire a 100% equity stake in Delek’s Mapco Express Inc. and certain related affiliated companies for cash consideration of $535 million. The deal is anticipated to close by year end and will be funded by cash on hand, Delek officials said.

The transaction has received unanimous approval of both companies’ Boards of Directors and is subject to customary regulatory and closing conditions. Under Delek’s complex maze of operations, Delek Logistics Partners LP oversees the retail segment markets motor fuel and convenience merchandise through a network of approximately 348 corporate stores operating primarily in Tennessee, Alabama and Georgia, with additional presence in Arkansas, Virginia, Kentucky and Mississippi.

The Delek company-operated convenience store locations operate under the MAPCO Express, MAPCO Mart, East Coast, Fast Food and Fuel, Favorite Markets, Delta Express and Discount Food Mart brand names.

“The sale of Mapco to Copec allows Delek to simultaneously unlock the value of these assets and gain a continuing competitive partner in retail fuel sales,” said Delek President and CEO Uzi Yemin. “We believe this transaction will provide Delek with increased financial flexibility as we explore future opportunities and creates an exciting opportunity for the Mapco brand and its employees as it becomes part of Copec’s growth strategy.”

This will be Copec’s first entrance in the competitive U.S. retail gasoline market, joining such foreign giants as Petroleos de Venezuela’s Citgo brand, Shell and BP brands from the United Kingdom, and Total of France. Of the 156,065 fueling stations in the country, approximately 31% have a major oil company brand, and another 19% carry the brand of another refining company. The remaining 50% sell “unbranded” fuel, according to the National Association of Convenience Stores (NACS).

Shell and BP have the most major oil branded retail outlets in the U.S. with 14,000 and 11,300 respectively. Chevron, ExxonMobil and ConocoPhillips follow with 8,000, 7,753 and 6,875, respectively. Among the refiners, Citgo, Marathon and Valero are at the top of the list with 5,900, 5,046 and 5,000 locations, respectively. Murphy Oil and Alon USA are listed in the ninth and 10th on that list with 1,128 and 900 locations. Among the hypermarkets, Kroger tops the list with 1,090 locations, followed by Wal-Mart Stores at 1,036. Sam’s Clubs is third on the list of 462 gasoline stations on their parking lots, NACS says.

Delek Holdings is also the U.S. operation of the Delek Group, an Israeli energy and financial conglomerate and one of the largest companies in Israel. In May 2015, Delek completed the acquisition of approximately 33.7 million shares, or approximately 48% of the outstanding shares, of Alon USA Energy common stock from Alon Israel Oil Company Ltd. for $564.5 million.

Copec said it will “generally” retain Mapco’s retail team to provide for a seamless entrance into the U.S. convenience store market.

“The acquisition of Mapco represents an important step for Copec’s entry into the U.S. convenience store market, which has been identified as a key strategic growth opportunity,” said Copec CEO Lorenzo Gamuri. “MAPCO’s assets are located in a geographic zone with interesting demographic attributes and with the size for a proper competitive operation in the US market.”

Delek’s sale of its retail locations allows the Brentwood, Tenn.-based downstream energy company to now focus on its refining business, which includes the company’s El Dorado and Tyler, Texas refineries that together produce 155,000 barrels of gasoline, diesel and other refined products for the several major markets across the Southeast. Delek’s 80,000 barrel per day refinery and pipeline operations in El Dorado, which it purchased from Lion Oil Company in March 2011, supplies gasoline and diesel fuel to Mapco and other retail locations across South Arkansas and into the key Little Rock and Memphis markets.

Through its Delek Logistics mastered limited partnership, the energy holding company also owns 450 miles of transportation pipelines and a 600-mile crude oil gathering system, in addition to associated storage facilities with 6.9 million barrels of active shell capacity supporting the El Dorado and Tyler refineries.  Those assets also include associated petroleum storage and terminal facilities in North Little Rock that compete with Magellan Midstream Partners, JP Energy Partners and Enterprise Product Partners.

Delek’s sale of its Mapco operations follows the company’s recent decision to cut 2016 capital spending in its retail operations to only $63.9 million in 2016, down 71% from $219 million in 2015 and $257million in 2014. Delek officials did not immediately respond to inquiries concerning questions about its Mapco operations in Arkansas.

Copec is one of the largest companies in Chile, operating in fuel and lubricants distribution and convenience stores. Copec has an existing presence in the convenience stores with the largest convenience store network in Chile and approximately 53% of Chilean gasoline market share with 626 company and dealer operated service stations, 82 Pronto-branded convenience stores and 220 Punto-branded convenience stores.

In addition, Copec has a majority ownership stake (58.9%) in Organizacion Terpel S.A., which is based in Bogota, Colombia, and accounts for approximately 45% of Colombia’s fuel market share. Terpel has 1,949 Terpel-branded gas stations in Colombia and 233 stores in Panama, Ecuador, Peru and Mexico under store brands Altoque and Deuna selling Terpel-branded fuel.