Guest Perspective: C-Store Industry Year in Review (Part 1 of 2)

An M&A and capital markets perspective

Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC

Dennis L. Ruben

SCOTTSDALE, Ariz. -- This article is designed to be the first in a series of annual and quarterly convenience store industry reviews from a mergers and acquisition and capital markets perspective. Our objective in this article is to provide an overview of all of the relevant, meaningful transactions that occurred in the industry during 2012.


After reviewing all available information about transactions and capital-related developments in our industry during 2012, some very clear conclusions emerge. Most important, it was a significant year for acquisitions of all sizes and types.

Although 7-Eleven Inc. was the "800-pound gorilla" in terms of the number and size of acquisitions it completed, there were many other buyers and sellers at all levels of the spectrum--from the small 10-store operator to the very large operator with more than 200 stores.

Furthermore, there was even a major oil company acquisition--Sunoco Inc. was acquired by Energy Transfer Partners LP (ETP). But the common theme is the same. More and more operators, particularly those who are smaller or midsize, concluded that they either needed to grow to be competitive in the marketplace or they needed to sell. And with 7-Eleven, Circle K and new master limited partnerships (MLPs) with large amounts of capital to invest, as well as climbing prices for convenience store assets and companies, the decision of many operators to sell became more logical.

A number of established companies, such as Susser Holdings, Wawa, Casey's General Stores and Kum & Go, embarked on aggressive new-store development initiatives during 2012, and many other industry participants elected to grow by acquisition of portfolios of retail assets having an established track record of performance. More important, the addition of MLPs on the scene only added more competitors to an already crowded field of potential purchasers.

As we have noted previously, within the past two years every major player in the industry has become much more aggressive in looking for acquisition opportunities. Companies that historically were only interested in certain markets or groups of stores of a certain size have expanded their horizons.

Now, it seems as if everyone is looking at every deal--no matter where it is or how big or small it is. Companies are not only looking for acquisitions for growth, but they are also looking over their shoulder at their closest competitors. All of this is good for current owners who are contemplating selling their companies or a portfolio of stores. The public companies, including the new MLPs, need to grow to meet the requirements of investors, analysts and Wall Street in general. Those pressures will also bode well for current owners of convenience stores who are pondering their future.

Although most of the major oil companies have concluded their retail asset divestiture programs, certain oil companies are going in the opposite direction. Speedway, Valero and Tesoro all made significant acquisitions last year that included retail convenience store assets, and, by all indications, they are committed to that strategy, at least in the near term.

With respect to Sunoco and its network of 4,900 retail stores, only time will tell what ETP decides to do with them. They will either provide a huge acquisition opportunity for someone, or a spectacular growth platform for their brand.

Industry observers are always keenly interested in the purchase prices and "multiples" of store-level EBITDA paid for various companies and portfolios of convenience store assets. Unfortunately, it is usually not possible to discern such information from what is made publicly available. In transactions involving private companies, neither the purchase price nor EBITDA information on the stores being acquired is disclosed. Similarly, in transactions involving public companies, sufficient information is not generally disclosed that would reveal the EBITDA multiples paid for such acquisitions.

Nevertheless, based on unofficial industry talk, it is fair to say that buyers seemed willing to pay higher and higher EBITDA multiples for quality retail assets with an established and predictable stream of cash flow.

The following summary reflects our assessment of the most important events of 2012 from a mergers-and-acquisition and capital-markets perspective:

The Year of the MLP

The year 2012 will probably best be remembered as the year of the MLP--or master limited partnership. During the year, a number of companies elected to form this tax-advantaged vehicle to access capital through the public capital markets in order to fund future growth, a move that has promoted further consolidation in the industry. The first major acquisitions by MLPs were completed by Waltham, Mass.-based Global Partners LP, which acquired Alliance Energy LLC, also of Waltham, and Dallas-based Energy Transfer Partners LP (ETP), which acquired Sunoco Inc., Philadelphia.

During the year, Northern Tier Energy LP, the owner of the St. Paul Park, Minn., oil refinery and SuperAmerica convenience stores in Minnesota and Wisconsin, filed an IPO to become a public company as an MLP. Susser Holdings Corp., Corpus Christi, Texas, also formed Susser Petroleum Partners LP as an MLP. Susser Petroleum Partners purchases motor fuel from independent refiners and major oil companies and distributes it through multiple channels--to all of the Susser Holdings convenience stores, pursuant to a 10-year fuel-distribution contract, to more than 80 other independently operated consignment locations where Susser Holdings sells fuel to retail customers, to more than 480 convenience stores and retail fuel outlets operated by independent operators, and to more than 1,300 other commercial customers, such as unbranded convenience stores, other fuel distributors, school districts and municipalities and industrial customers.

Alon USA Partners LP, an affiliate of Dallas-based Alon USA Energy Inc., filed an IPO during the year, as did Lehigh Gas Partners LP, Allentown, Pa.

In addition, some of the major oil companies formed MLPs to take advantage of the preferential tax structure and access to public capital. MPLX LP, a subsidiary of Marathon Petroleum Corp., Findlay, Ohio, filed an IPO during the year, and Houston-based Phillips 66 announced its intention to contribute a portion of its transportation assets to form an MLP in 2013. The use of the MLP structure should provide a significant source of additional liquidity for companies with a major fuel distribution component.

7-Eleven Inc.

It was truly an amazing year for Dallas-based 7-Eleven in terms of its acquisition activity. No industry participant made anywhere near as many acquisitions as 7-Eleven. [See the January issue of CSP magazine for details.]

The company started the year by announcing some very ambitious annual goals. Based upon their accomplishments in 2012, they clearly met or exceeded those goals. Their first major reported acquisition involved 51 North Texas sites from Exxon Mobil Corp., Irving, Texas. That deal was followed by the acquisition of 55 Sam's Mart convenience stores in North and South Carolina. They also focused on an expansion in various markets where they already had a presence, such as Manhattan, Jacksonville, South Florida and Maryland. Next, 7-Eleven acquired 19 stores of the Open Pantry convenience store chain in the Milwaukee and Madison, Wis., markets.

The next major acquisition was the biggest one of the year--TETCO Inc., consisting of 163 convenience stores in Utah and the Dallas-Fort Worth, Austin and San Antonio areas of Texas, plus fuel distribution to TETCO's wholesale distributors. 7-Eleven then acquired 76 stores in West Virginia, Ohio, Kentucky and Pennsylvania from Prima Marketing LLC, a 7-Eleven licensee, which was represented by NRC during the sale process.

The next acquisitions were EZ Energy USA, Seven Hills, Ohio, and Handee Marts Inc., Gibsonia, Pa. In the EZ Energy USA transaction, 7-Eleven acquired 67 Easy Trip and BP convenience stores in the Cleveland and Pittsburgh markets and the wholesale fuel-supply business that supports 20 of EZ Energy's dealers. In the Handee Marts Inc. transaction, 7-Eleven acquired 58 stores in the Cleveland and Pittsburgh markets, as well as locations in northern West Virginia and western Maryland. Handee Marts had been a licensee of 7-Eleven prior to the acquisition.

Next came the acquisition of 12 Fast Track stores in North Carolina from FAW Cos. The final large transaction of the year involved Victoria, Texas-based C.L. Thomas Inc., in which 7-Eleven purchased 143 mostly Texas-based Speedy Stop and Tigermarket locations.

Alimentation Couche-Tard/Circle K

Last year also proved to be an extremely active one for Laval, Quebec-based Couche-Tard in terms of acquisitions. At a price tag of $2.7 billion, it acquired the international company Statoil Fuel & Retail, which brought it a broad retail network across Scandinavia, Poland, the Baltics and Russia, with approximately 2,300 full-service (fuel and convenience) or automated (fuel-only) stations. That transaction closed in June.

In April, Couche-Tard acquired 17 convenience stores in Maine from Dead River Co. In May, it acquired 20 stores in Austin, Texas, from Signature Austin Stores. It also added several new stores in markets where it already has a presence.

In July, Circle K announced that Mid-Atlantic Convenience Stores Inc., Richmond, Va., would be a regional developer for Circle K on an exclusive basis in its present markets. Circle K next announced the acquisition of 27 convenience stores in eastern Washington from Sun Pacific Energy. It followed up that transaction with the acquisition of 29 stores in Orlando, Fla., from Florida Oil Holdings LLC. Finally, Circle K agreed to acquire 29 convenience stores in the Midwest from Dickerson Petroleum Inc., Belleville, Ill.

Other Major Industry Players

  • Susser Holdings Corp., which operates approximately 550 convenience stores in Texas, New Mexico and Oklahoma, had a very busy year. It had a very aggressive target for new store development for the year, in the 25- to 30-store range, and also created a master limited partnership, Susser Petroleum Partners LP, to engage in the fee-based wholesale distribution of motor fuels to Susser Holdings Corp. and third parties.
  • Wawa Inc., Wawa, Pa., operating approximately 600 convenience stores in the Northeast, embarked on a strategy to aggressively build new stores in Florida, primarily in the Tampa and Orlando markets. Wawa has indicated that it plans to build up to 100 new stores in Florida over the next several years.
  • Casey's General Stores Inc., Ankeny, Iowa, announced that it would move into Arkansas, Kentucky and Tennessee with new stores. In addition, Casey's acquired 22 convenience stores from Kum & Go in Iowa, Missouri and North Dakota.
  • Lehigh Gas Partners LP, having just completed its own master limited partnership, acquired the 45-store Express Lane chain in the Tallahassee and Panama City, Fla., markets. Lehigh Gas also acquired 24 stores in northeastern Pennsylvania from Dunmore Oil Co., Dunmore, Pa., and its affiliate, JoJo Oil Co. Inc.
  • Kum & Go, West Des Moines, Iowa, announced that it would enter the Colorado Springs, Colo., and Little Rock, Ark., markets and would build 20 to 25 stores there over the next five years. By the end of 2012, Kum & Go had opened 43 new stores in nine states.

Other Notable M&A Transactions

During 2012, there were a number of other M&A transactions of varying sizes, including:

  • Temple, Texas-based Fikes Wholesale Inc., parent company of the 194-unit CEFCO convenience store chain, bought the retail operations of 63 Taylor Food Mart Stores from Taylor Petroleum Co. of Amarillo, Texas.
  • Miller Oil Co., Champaign, Ill., sold its seven Colonial Pantry stores in Illinois to VPS Convenience Store Group LLC of Wilmington, N.C.
  • Carroll Independent Fuel Co., Baltimore, acquired the 46 convenience stores of High's of Baltimore Inc.
  • Cloutier Oil Co., Natchez, Miss., sold its 11 Gas Lane & Deli company-operated convenience stores and nine dealer locations in Mississippi to Victory Marketing LLC of Ridgeland, Miss.
  • Thorntons Inc., Louisville, Ky., announced its expansion into the Florida market, and indicated that it plans to add 15 to 20 stores in the Tampa-St. Petersburg-Clearwater markets in the next three years.
  • Empire Petroleum Partners LLC, Gaithersburg, Md., acquired the assets of Dallas-based American Energy Distribution LP and merged its operations into Empire. American Energy was one of the largest independent fuel distributors in Texas.
  • City Stop sold its 11 convenience stores in the Las Vegas metropolitan area to S&S Fuels LLC of Littleton, Colo. NRC represented City Stop as exclusive financial advisor in the sale.
  • Textron Energy, a subsidiary of Classic Star Group LP, Fort Worth, Texas, acquired the Mr. Zip convenience store chain from Mr. Zip Inc. of Cleveland, Tenn. The acquisition consisted of 16 convenience stores and a wholesale fuels business.
  • Interstate Petroleum, a subsidiary of Marsh Petroleum, Greeneville, Tenn., sold all 17 of its Kwik Shop and Kwik Fuel convenience stores in Tennessee to Lee Oil Co. Inc., Middleboro, Ky.

In Part 2 of this series, we'll look at oil company initiatives, divestiture of non-strategic assets, bankruptcies, retail initiatives and more.

[Editor's Note: Dennis L. Ruben, executive managing director of NRC Realty & Capital Advisors LLC, will contribute an annual and quarterly column to CSP, analyzing mergers and acquisitions and key economic trends in the convenience channel. He can be reached at [email protected]. He will also headline the Capital Markets Symposium at this year's Outlook Leadership Conference, Nov. 9-12 in Scottsdale, Ariz. Registration opens Feb. 2013.]

By Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC
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