By Taiga Uranaka and Vishaka George
(Reuters) - Sunoco LP said on Thursday it would sell 1,110 convenience stores to Japan's Seven & i Holdings Co for $3.3 billion as the Texas-based convenience store operator shifts its focus to its fuel supply business.
Sunoco's shares jumped as much as 24 percent to $29.50 in morning trading on Thursday - their biggest one-day percentage rise in three years.
As part of the deal, the U.S. company will also supply about 2.2 billion gallons of fuel annually for 15 years for guaranteed payments to a unit of the operator of 7-Eleven chain of convenience stores.
The deal is the first step in Sunoco's strategic move away from company-operated convenience stores to its fuel supply business.
"We view Sunoco's divestiture of assets and agreement with 7-Eleven positively as the transaction should alleviate (its) currently high leverage position and provide significantly higher cash flow visibility," RBC Capital Markets analyst Elvira Scotto said in a client note.
Sunoco, which had about $4.51 billion in long-tem debt as of December, said it expects to use proceeds from the sale to primarily to repay debt.
Seven & i Holdings has been aggressively opening stores in Japan as well as the United States, where it has been acquiring stores from local retailers.
Its latest purchase comes as operators of traditional big-box retailers, including Seven & i, have been suffering weak sales as changing tastes and modest wage growth prompt shoppers to defect to cheaper speciality chains and online outlets.
"The U.S. convenience store market has growth momentum. We see opportunities there," Seven & i President Ryuichi Isaka said at an earnings briefing after announcing the Sunoco deal.
Seven & i runs general merchandise, department and speciality stores, but the bulk of its operating profit comes from convenience stores.
The deal would be the biggest by the Japanese company's U.S. unit 7-Eleven Inc.
Seven & i has about 19,400 7-Eleven stores in Japan and 8,700 in the United States and Canada, including those run by franchisees.
7-Eleven Inc, known for its "Slurpee" frozen beverage, has said it aims to increase its number of stores to 10,000 over the three years through 2019.
Sunoco, in which pipeline operator Energy Transfer Partners has a stake of about 45 percent, operates about 1,350 retail fuelling sites and convenience stores under brands such as APlus and Stripes, the firm's website showed.
(Reporting by Taiga Uranaka; Additional reporting by Ritsuko Shimizu, Chris Gallagher and Vishaka George; Editing by Christopher Cushing, Martina D'Couto and Saumyadeb Chakrabarty)
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