A Season of Opportunity

Mitch Morrison, Vice President of Retailer Relations

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On an early spring day, Casey’s General Stores took to the social networks to share some news with its legion of supporters.

“As you may be aware,” the company told its 4,000 Facebook fans, “Couche- Tard Inc. has made an unsolicited proposal to acquire Casey’s General Stores Inc. Please refer to the attached link …”

This was no slick Madison Avenue news conference or verbal slingshot fired from some silo. It was a sophisticated company with down-home appeal talking to customers such as Helen and store employees such as Lori in this virtual intimate setting. And they responded immediately. “Casey’s, your board of directors are to be commended, and your stockholders will hopefully stand as strong,” Helen wrote back on Casey’s Facebook page. “We all need to stand behind you as a thank-you for all you have done for the communities where you have stores!”

From Lori, a simple yet sweet message: “As an employee of Casey’s I say thank you.”

Spring is the season of blossoms, of new growth and fresh opportunity. Folks across the land are tending to gardens, staking tomatoes and stealing moments to enjoy the fresh outdoors. Children are finishing finals, stowing away their long sleeves and eyeing a summer of camp and fun.

Some businesses are inhaling the same air and feeling pretty muscular, ready to take off. Take the airline industry— at press time, United and Continental were in prenuptial discussions about their merger.

And of course there’s our industry. In a matter of weeks, it was jolted with the report that Alimentation Couche- Tard, North America’s second largest c-store chain, publicly made known its desire to acquire Casey’s, the Midwest’s largest traditional convenience company with roughly 1,500 units, most operating in small hamlets.

The cash tender, at $36 per share, is quite serious, representing a 7.4x trailing EBITDA. “That is a very good price,” an industry source with extensive financial knowledge shared with me days after the offer went public. The offer represents approximately $1.3 million per store—one likely to discourage other potential bidders.

The tale of acquisition soon extended from the Midwest to the Middle East, with implications for the U.S. Mid- Atlantic. EZ Energy’s Eli Zahavi strolled into a bondholders meeting in Tel Aviv. Only it wasn’t a meeting of his financial folks—it was that of Petro Group, owner of the 214-unit Fas Mart/Shore Stop network, based in Richmond, Va. His statement was rather simple, but its implications were quite serious: “EZ Energy has fuel stations in the U.S., and I propose adding Petro Group’s stations to our portfolio.”

 As of this writing in early May, it appeared that the bulk of Petro Group’s shares would indeed switch hands, but not to Zahavi. While the buyer remained a mystery, officials with Petro Group confirmed the company was closing in on a deal with a private equity investor.

But with Casey’s and Fas Mart, with Couche-Tard and EZ Energy, there is a bigger story, one that bodes well for the convenience channel at large but raises concerns for iconic brands and their loyal customer base. While a national recession may be restraining the nation’s wallets, the c-store segment appears pregnant with opportunity and interest.

At the NACS® State of the Industry Summit in April, Ray Cleeman, managing director of The PrinceRidge Group LLC, may have struck some as speaking in hyperbole when he said, “There’s literally billions of dollars” from private equity groups looking into the convenience and gas segment.

But I suspect he’s spot-on. Some financial experts are saying the c-store industry is ripe for a season of consolidation, a year when the harvest of acquisition may deliver a bountiful yield.  

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