TravelCenters of America LLC, known mainly for its truckstops operated under the TA and Petro Stopping Centers brands, is embarking on a quest to expand its convenience-store network. The Westlake, Ohio-based company, which operates 370 convenience stores (256 of which are located at travel centers), acquired 45 stores from January through June this year and announced plans to acquire more than 100 additional stores by the end of the year.
“Our expansion into the stand-alone c-store space leverages our experience operating large, modern convenience stores, and I continue to believe that we’re investing at attractive, stabilized multiples for acquired sites,” CEO Thomas O’Brien said during the company’s second-quarter 2015 earnings call. “Moreover, I believe we have also leveraged the growth in our convenience-store portfolio to deepen our relationships with a number of existing and new fuel suppliers.”
TA has agreed to acquire 123 c-stores for about $230 million in six separate transactions from August through December. It expects to rebrand each c-store as Minit Marts, as well as “add prepared on-site food offerings at many of these stores and rebrand the gasoline at about half of them,” O’Brien said.
The c-store appeal for a company such as TA is all about growth and diversification, says research analyst Benjamin Brownlow of St. Petersburg, Fla.-based Raymond James.
Brownlow says because there are about 150,000 c-stores and only about 1,700 to 1,800 interstate-based truckstops across the country, c-stores present more opportunities for TA to grow and “diversify away from interstate-based trucking volume.”
However, acquiring 123 locations from August through December did come as a surprise to Brownlow. “That’s a significant amount of real estate to take in in such a short six- to eight-month period,” he says.
Brownlow expects TA to be successful in its quest. “The general sense I get from investors is the growth and the diversification is attractive but there’s some uncertainty about how well they are going to be able to execute,” he says. “I think it will be a little bit challenging, but there’s nothing, looking back at [TA’s] track record, that says management won’t be able to succeed.”
In August alone, TA acquired 67 locations. Thirty-three are located in northern Illinois and come with the purchase of MKM Oil Co.’s Fast N Fresh Chains. The stores average about 3,400 square feet.
MKM Oil, which has been in business since 1989, began with one gas station, which the company later converted to a convenience store and grew to its current store base of more than 30 locations.
Also in August, TA confirmed it had acquired 21 Thoroughbred Energy-branded c-stores in Kentucky from Traxx Cos. And expects to acquire 13 additional principally leased locations upon the seller satisfying certain closing conditions. The 34 locations average more than 3,100 square feet in size. TA said it has begun to operate all of the acquired c-stores and substantially all of the to-be-acquired stores.
TA first began its expansion into the c-store space when it purchased 31 Minit Mart stores in Bowling Green, Ky., from Fred Higgins in 2013 for $67.9 million. It remained relatively quiet in M&A until the burst of activity this year.
During first-quarter 2015, TA acquired two travel centers, including one the company previously operated under a management agreement, for $8.4 million; and 26 c-stores for $38.7 million in three separate transactions, including 19 Best Oil Little Stores, mostly in Minnesota. Also, during second-quarter 2015, it acquired 19 c-stores, averaging about 3,900 square feet, principally in Kansas and Missouri from Overland Park, Kan.,-based GasMart USA for $27 million. These 45 stores also will be rebranded as Minit Marts.
With December just around the corner, expect TA to continue rolling out one c-store acquisition after another, making for a busy fourth quarter. And as for 2016, Brownlow of Raymond James says he wouldn’t be surprised if acquisitions slow down next year.
“I would anticipate they would take some time to digest those [123] acquisitions before getting back into the market,” Brownlow says. “But that’s not to say that they couldn’t take advantage of … opportunistic acquisitions as they come up.” —Additional reporting by Greg Lindenberg
The Path to C-Store Expansion
TravelCenters of America LLC acquired 76 gasoline stations/convenience stores from December 2013 to June 30, 2015, with plans to purchase an additional 123 c-stores from August through the end of the year. Here’s a glimpse into those transactions.
December 2013
TA completes its acquisition of 31 gasoline/c-stores, 28 in Kentucky and three in Tennessee, for $67.9 million from Fred’s Minit Mart LCC, Bowling Green, Ky.
March 2015
TA acquires 26 gasoline/c-stores, 18 in Minnesota and six in Kentucky, for $38.7 million in three separate transactions. Nineteen Best Oil Little Stores were included in the acquisition.
May 2015
TA acquires 19 gasoline/c-stores, 16 in Missouri and three in Kansas, from Overland Park, Kan.-based GasMart USA for $27 million.
August 2015
TA completes its acquisition of 33 c-stores in northern Illinois with the purchase of MKM Oil Co.’s Fast N Fresh Chains. TA acquires 21 Thoroughbred Energy-branded c-stores in Kentucky from Traxx Cos. and says it expects to acquire 13 additional principally leased locations upon the seller satisfying certain closing conditions.
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