OMAHA, Neb. -- Last year was a whirlwind of activity for Buchanan Energy.
In February, it acquired a 40,000-square-foot warehouse it planned to tap as a food distribution center. And then before the year came to a close, the operator of Bucky's convenience stores pulled a plum, landing nearly 90 ExxonMobil sites in the brutally competitive Chicago and St. Louis markets.
Twelve months later, the Omaha-based jobber, with roughly 150 company- and dealer-operated sites is no longer plowing a bull-market strategy. As reported in the Morgan Keegan/CSP Daily News Flash yesterday,Buchanan has retrenched, announcing plans to divest 61 stations comprised of 38 ExxonMobil-branded sites in the Chicago area and 23 BP-branded locations in the St. Louis market.
"These stores include a number of our prime retail locations and some high-volume stations," company president Steve Buchanan said in a statement. As required under the Petroleum Marketing Practices Act (PMPA), dealers will be given right of first refusal to purchase their stations.
"We believe they [stations] will provide great opportunities for the right dealers or multi-site operators," Buchanan added. "We will also give serious consideration to bidders who are able to provide additional fuel volume from other locations."
Efforts to reach Buchanan yesterday for additional comment were not successful. He has retained NRC Realty & Capital Advisors to direct the selloff.
The news caused a buzz among operators in the Midwest and those familiar with Buchanan Energy and its Bucky's retail network.
Sources told CSP Daily News that the company was undercut by both internal and external challenges. Of the latter, Buchanan is fighting stiff headwinds in the St. Louis market, where fuel margins have been frightfully low.
Compounding tough market conditions, the company appears to lack the necessary infrastructure to effectively compete in the tightly contested Chicago and St. Louis markets, struggling to meet the strict volume and design expectations of both BP and ExxonMobil.
"There's been some question whether Buchanan was overleveraged," one operator told CSP Daily News. "They have been growing very fast but they didn't seem to have the personnel you need to run that growth."
Rapid Climb
It was in 2005 when Buchanan acquired its St. Louis assets, a market known for tight fuel margins. The expansion propelled Buchanan beyond its Nebraskan borders, where Steve Buchanan formed the chain in 1980 with a single convenience store in Omaha.
While the outfit continues to operate 30 locations in Omaha and Council Bluffs, Iowa, it was in Missouri and Illinois where it eyed dramatic growth, punctuated by its stunning purchase of 89 locations in the Chicago metro area from Exxon Mobil Corp.
In addition to its c-store network, the company's portfolio also features 22 tunnel car washes, the 40,000-square-foot warehouse it uses for its Bucky's Express c-stores in the Omaha market, and fuel contracts with BP, ExxonMobil and Phillips 66.
Addressing the pending divestiture, NRC Managing Director Denny Ruben said in a statement, "The combination of a long-term fuel supply agreement with a leader in the industry and the opportunity for ownership of the real estate makes these very desirable locations for existing operators, as well as for new entrants to the industry. Anyone with an interest in either of these markets should take a serious look at the stores in this portfolio."
He added that the selloff is simply a change of strategy for Buchanan.
"All he's doing is changing the channel of trade [for these sites]," Ruben told CSP Daily News. "He's going from company-owned, company-operated stores to dealer-operated. He will be retaining the fuel supply, so what he's doing is selling the real-estate and entering into long-term supply agreements with the buyers."
Ruben added that Buchanan will continue to operate the remaining stores in his chain.
The sale will be conducted using NRC's "buy one, some or all" sealed-bid sale process. The bid deadline for the St. Louis-area stores is February 16, 2012, while the bid deadline for the Chicago-area stores is March 8, 2012. A complete list of the properties and information regarding submitting offers is available online at www.nrc.com/1105.
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