SAN ANTONIO -- Two weeks ago, Kim Bowers hopped on a plane from her home base of San Antonio to Allentown, Pa., for employee meetings and from there drove to upstate New York for a private meeting with senior leaders at a different company. Her pace is rushed, her energy contagious--an apt metaphor for the company she leads.
Bowers is CEO and chairperson of CST Brands Inc., the trailblazing operator of a retail network that its former owner, Valero Energy Corp., divested last year as a modest footnote to an otherwise multi-billion dollar refinery powerhouse.
In just a matter of weeks, CST has entered into two hugely important deals--important for different, yet related reasons.
Earlier this month, CST announced an $85-million agreement with Bethlehem, Pa.-based Lehigh Gas Partners, a transaction that on the surface seems modest but allows the retailer to parlay Lehigh’s status as a master limited partnership (MLP) company with critical corporate tax advantages; and to tap Lehigh’s strong distribution relationship with multiple major oil brands.
And late Wednesday, as reported exclusively by CSP Daily News, CST, the operator of approximately 1,350 stores in the United States and Canada, entered into a definitive agreement to acquire one of the industry’s best family-run chains, Nice N Easy Grocery Shoppes, in upstate New York.
Interestingly, in CSP magazine’s cover feature on CST Brands, some financial houses dubbed the company a single-digit, slow-growth investment.
That story couldn’t be further from the truth. CST has big ambitions, one that suggests that the Nice N Easy deal isn’t the last, nor is the Northeast the only frontier CST seeks to enter.
Already, some industry observers and financial analysts are staking CST and equity group Energy Transfer Partners (ETP) as the two companies to watch in integrating a highly fragmented convenience store industry replete with small- and mid-sized family-run businesses.
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What positions these Texas titans is that both are MLP companies equipped--and charged--to grow largely through mergers and acquisitions. Also, both are empowering industry veterans to manage their retail operations. While the convenience store channel has already seen ETP pick up Sunoco’s downstream assets and enter into a deal for Susser Holdings Corp., it may now be CST’s moment to turn some heads.
During a 45-minute interview with CSP Daily News, Bowers spoke about the acquisition of Nice N Easy, its aspirations to become a national powerhouse and the role Lehigh could play on the fuel side.
- Nice N Easy: “We see them as a network of great stores with a great footprint for growth.” Bowers spoke of not only preserving the Nice N Easy brand, but extending it as a branded platform from New York to Montreal, as it looks to pursue other acquisition in the Northeast.
- Going national: “We don’t see this deal as a one and done. This is about building a footprint for us to grow across the United States.”
She added, “We hope others will look at this deal and see us as a potential partner. We definitely see ourselves as an acquirer of family-run stores and as a company that believes in the culture and important community role these [chains] have played.”
While the bulk of CST’s portfolio is made of its Corner Store convenience store brand and Valero fuel, the company overtime expects to tap Lehigh’s strong distribution skills to offer a variety fuel brands based on a given market.
As for the retailing brand, Bowers said, “We clearly need to be adaptable enough to merchandise and brand based on the local market. If we were to rebrand Nice N Easy to Corner Store it would be silly, it wouldn’t make sense to discontinue an iconic brand like Nice N Easy.”
- Is CST a long-term player? “We are looking to grow … whether it’s in the Northeast or the Midwest or anywhere in the U.S. We like to own the stores. This is not an exit strategy. We are here for the long run.”
In that respect, CST is different from the rollup companies of the 1990s, when The Pantry, Clark, Swifty Serve, Convenience USA and others that collectively gobbled dozens of chains in the hopes of selling out and walking away with a handsome profit. Unfortunately for them, most nosedived, disintegrating unceremoniously with only The Pantry to have survived.
CST, on the other hand, enjoys a healthy balance sheet and fields a veteran team long schooled in convenience retailing.
CST is only a year old and already it’s making quite a splash. Who will be CST’s next acquisition remains to be seen, but what is certain is that CST has only just begun.
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