At the time, Sunoco had announced plans to exit the unprofitable refining business, but it was actively trying to sell its two remaining refineries in the Philadelphia region. Indeed, Sunoco on April 23 announced a deal to keep its largest refinery in Philadelphia open by enlisting the Carlyle Group, a private equity investor, to operate it as a joint venture. That deal is reportedly very close to being completed.
Sunoco's financial adviser, Credit Suisse, told Company A that Sunoco's board was unlikely to accept its offer, which included little or no premium to Sunoco shareholders.
A few weeks later, in February, Sunoco's MacDonald met the Company A chief executive at an industry conference in Vail, Colo. The executive did not discuss a price for Sunoco, according to the SEC filing, but he told MacDonald his company planned to "relocate substantial operations from the Philadelphia area if a transaction were to occur."
A Sunoco team headed by MacDonald, who had succeeded Elsenhans as Sunoco's CEO on March 1, made a management presentation to Company A on March 16 in Detroit, according to the filing. In the following weeks, Company A improved on its initial offer.
While talks with Company A were proceeding, ETP entered the competition.
On Feb. 28, Kelcy Warren, the chief executive of ETP's general partner, met with Sunoco executives to discuss the possibility of a strategic venture between Sunoco and ETP, which primarily operates natural gas pipelines along the Gulf Coast. During the meeting, Warren asked if Sunoco would be open to an acquisition.
Talks with ETP proceeded quickly. On March 22, ETP offered to buy Sunoco for about $46.40 a share in cash and stock, a 20 percent premium on Sunoco's price. After looking more closely at Sunoco's books, ETP later boosted its offer to $50.13, a 29 percent premium above Sunoco's average price for the previous month. That is the price that is now on the table.
On April 19, the Sunoco board looked at Company A's last offer and "concluded that the transaction proposed by Company A was still inferior to the proposed ETP merger transaction in terms of value to the Sunoco shareholders." Less than two weeks later, the ETP merger was announced.
Sunoco officials declined to identify Company A, but analysts said privately there is a small universe of large companies involved in refining, marketing and transporting fuel. They speculated that Marathon Petroleum Corp. fit the description of Sunoco's suitor. Marathon is based in northern Ohio, operates a refinery in Detroit and has been openly shopping for acquisitions.
Robert Calmus, a Marathon Petroleum spokesman, declined to comment. "We don't speculate or comment on market rumors," he said.
The background on the merger process is included ETP's filing that contains the proxy statement that will be sent to Sunoco shareholders ahead of a vote on the merger. A date for the vote has not yet been set.
The merger will cap a process that started in 2009 when Sunoco, which was founded in 1886 by Joseph Newton Pew and Edward O. Emerson, began a process aimed at disposing of assets in order to focus on its most profitable businesses.
It shut down its Eagle Point refinery in Westville in 2009, and sold its refineries in Tulsa, Okla., and Toledo, Ohio. Bit by bit, it sold off its chemical business. It spun off its metallurgical coke business, SunCoke, over the last year.
In the middle of 2011, according to the SEC filing, three private equity firms approached Sunoco executives "about acquiring some or all of the refining business of Sunoco and possibly Sunoco in its entirety." The firms signed confidentiality agreements and studied Sunoco's books as part of a due diligence process.
"Following their review of the due diligence information, none of the private equity firms expressed any interest in pursuing an acquisition of Sunoco in its entirety," according to the filing.
Last September, Sunoco announced plans to exit refining by the summer of 2012, either by selling the refineries or shutting them down. It also said that it was conducting a "comprehensive strategic review of the company to determine the best way to deliver value to shareholders" — a signal that it was for sale.
Contact Andrew Maykuth at 215-854-2947 or firstname.lastname@example.org or follow on Twitter @Maykuth.