Northeast Property Uptick
Sunoco, ExxonMobil location sales could fuel a new round of M&A activity
[Editor's Note: This article, a focus on M&A activity in the Northeast region, is the fifth in an ongoing series on how the recession is affecting the c-store landscape.] PHILADELPHIA -- With the recently announced plan to sell 165 Sunoco sites in the Northeast and East Coast, merger-and-acquisition activity is bound to intensify in the region, even as the nation braces for the full impact of a documented recession.
The Northeast in particular is seeing a burst of activity, with the Sunoco announcement coming on the heels of Houston-based ExxonMobil starting [image-nocss] the bidding process for its 1,200 sites in the region.
ExxonMobil's move mimics decisions by Houston-based Shell and BP to exit direct-operations in favor of third-party or franchised locations. "This move will include the conversion of a majority of these markets to branded distributors, building on the strength of [our] current distributor network," ExxonMobil spokesperson Prem Nair told CSP Daily News. "We believe this transition is the best way for ExxonMobilto compete and grow in the future."
In a Kraft/CSP Daily News poll from last month, many of the 203 respondents (30%) believed regional jobbers will benefit most from the ExxonMobil disbursement, with Laval, Quebec-based Alimentation Couche-Tard coming in second (20%) and "foreign investors" ranking third (12%). From options that included Sanford, N.C.-based The Pantry and Corpus Christi, Texas-based Susser Petroleum, the choice "all of the above" took one-fifth of the votes.
For Philadelphia-based Sunoco, the move to sell 165 sites is not an indication of a retreat from retail, according to the company. Spokesperson Thomas Golembeski said the sites up for sale represent only a small percentage of the chain's 1,114 company-controlled stores.
Bob Owens, senior vice president of marketing for Sunoco, said in a quarterly conference call Thursday that the company will maintain its market presence in keeping the sites branded Sunoco and expects the recently announced sale to be complete in about two years. Also in that call, Owens said gasoline margins rose to a healthy 23 cents per gallon in the fourth quarter, making up for a difficult period earlier in 2008 when crude and street prices were at historic highs.
In addition to the Sunoco and ExxonMobil activity, Dallas-based 7-Eleven Inc. earmarked the New York metro area in its plans to increase market penetration and improve its distribution operations, according to company officials.
The remapping of retail control will have winners and losers, said observers. Those with access to capital and credit will be able to make moves while others will have to sit on the sidelines. Unfortunately, those among the independent class of trade appear to be in more of a "distressed" situation. "Margins had been healthy for the fourth quarter, but the question is whether those healthy margins will make up for non-existent margins earlier in the year," James Calvin, president, New York Association of Convenience Stores, Albany, N.Y., told CSP Daily News. "In New York, there continues to be extreme pressure on c-store profitability, particularly with single-store operators. We're naturally concerned about entire industry, but we are particularly concerned about the fate of the independent."
To view a complete summary of recent merger-and-acquisition news from the Northeast region, click the "Download Now" button below.
And for more insights on the changing c-store merger-and-acquisition landscape and to view CSP's exclusive countdown of the nation's Top 10 Changing Markets, watch for the February issue of CSP magazine.Also, click here to check out CSP's new and exclusive interactive map that catalogs reported merger-and-acquisition activity by region.