Wilson Farms' Growth Challenge

Proud of its 42-year history, chain president considers buyout by 7-Eleven a compliment

Steve Holtz, Editor in Chief, CSP Daily News

BUFFALO, N.Y. -- Paul Nanula and his family have co-owned Wilson Farms for six years and been associated with it since its inception in 1969. For him, selling the chain of 188 convenience stores to 7-Eleven Inc. isn't the end of the line, but rather a passing of the baton and even, the beginning of a new race in an industry he has come to love.

"We have a 42-year tradition at Wilson Farms. It concerned to us that the Wilson Farms brand is going to go away with the acquisition," the president, CEO and principal partner told CSP Daily News yesterday. "We really looked [image-nocss] at it as: When the largest convenience store chain in the world wants to buy your chain, that's a pretty big compliment. So we looked at it as a compliment to our brand, a compliment to the team of people that we have running the stores and the leadership that we have in our organization."

(Click here for previous CSP Daily News coverage.)

Nanula said 7-Eleven--and a second unnamed suitor--first approached Wilson Farms to purchase the chain about two years ago. Things didn't work out then. But when a more aggressive 7-Eleven came knocking about seven months ago, it was clear a deal could be reached.

"7-Eleven was interested in entering this marketplace, and being that we're the market leader in this marketplace, they said that [Wilson Farms] would be a natural fit for us to acquire," Nanula said. "So we started talkingand we worked through the process and it came together where they thought it was a fantastic fit for their organization to buy us and they pursued it."

Wilson Farms was in a slightly different place this time around, as well, Nanula said. For six years--since he, his father Savino Nanula and partner Daniel Shanahan collaborated with Bruckmann, Rosser, Sherrill & Co. LLC (BRS) to purchase the chain from Ahold USA--they grew the chain using its own working capital and little other investment.

"When we bought the company six years ago, we bought it with the intention of continuing to grow it," Nanula said. "We've been through some great growth years for us in very difficult times. We were able to make some very good progress with top-line sales, with bottom-line profitability, with people development, putting a great team in place. There are a lot of very positive things that we did over these past six years.

"But we have had our challenges, and the industry itself has had challenges.... We've invested almost $26 million in six years back into the stores. We've done that out of cash flow and our growth internally, without any large infusion of additional capital.... So our ability to continue to do that and to continue to grow becomes challenging. At some point in time, we have to look at that and--especially when someone like 7-Eleven with great growth potential comes in and wants to buy the market leader--we had to look at it and give it a serious look."

All of the above hasn't soured Nanula's affection for the c-store industry, however, as he suggests he and Shanahan may invest in another chain somewhere down the line.

"We really do like the channel and, frankly, we know the channel is fragmented so there's further consolidation that needs to occur. I think more and more companies are looking [to consolidate]," he said. "We have a few companies that we're working with that want to go out there and do some additional consolidation, maybe marry a few companies together and develop a larger footprint."

In the meantime, Nanula and Shanahan remain at the helm of Wilson Farms until the deal closes in the next couple of months, as reported yesterday in CSP Daily News. Then, both will serve as consultants to 7-Eleven for about six months to facilitate the ownership transition.

After that, "we're going to step away from this area for a period of time, but there are other opportunities that may come up and if it's in the c-store channel, that's great," Nanula said. "If it's somewhere else, we'll look at those opportunities too."

BMO Capital Markets acted as exclusive financial advisor to BRS and the Nanula family in the sale of Wilson Farms to 7-Eleven.

Dallas-based 7-Eleven operates, franchises or licenses more than 8,400 stores in North America. Globally, there are more than 40,500 7-Eleven stores in 16 countries. During 2010, 7-Eleven stores worldwide generated total sales of more than $62.7 billion.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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