Insider's View: M&A & Capital Markets Review Q1 2014

Stage set for “bigger deals” in second half of the year

Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC

mergers and acqusitions

SCOTTSDALE, Ariz. -- Let’s be honest, there were no “blockbuster” merger-or-acquisition deals announced during the first three months of 2014, but the quarter was certainly lively in terms of other developments and transactions having a big impact on the convenience store industry.

First and foremost was the controversy surrounding The Pantry Inc. and the group of dissident shareholders that attempted to cause a change in the direction of the company and the composition of the board of directors. After nearly three months of accusations and criticisms back and forth between the company and the dissident shareholders, the dissident group was ultimately successful in getting its nominees elected to the board of directors.

It will be interesting to observe in the months ahead what effect, if any, the newly elected board members will have on the direction of the company.

Some of the other most significant developments during the quarter involved the decisions by several major industry participants to conduct an analysis of their real-estate portfolios to determine whether all of their stores continued to make economic sense and fit their business models. CST Brands Inc., 7-Eleven Inc. and Getty Realty Corp. all announced major divestiture programs during the first three months of the year, with the stated objective to rationalize and optimize their real-estate portfolios.

There were certainly several notable M&A transactions that occurred during the quarter, but it seems likely that the majority of the bigger deals of which we are aware will be announced in the third and fourth quarters.

The Pantry Inc.

No company in the convenience store industry had more publicity than The Pantry during the first quarter of 2014. A group of dissident shareholders known as “Concerned Pantry Shareholders (CPS)” emerged, announcing that they were “dedicated to maximizing shareholder value and improving corporate governance at The Pantry.”

Toward that end, they nominated their own slate of three directors to replace the current members of the board of directors who were up for reelection at the company’s annual shareholders’ meeting.

The group consisted of JCP Investment Management LLC and Lone Star Value Management LLC, which collectively controlled nearly 2% of The Pantry’s common stock. Both the company and CPS went on a public-relations campaign, issuing a series of statements about their respective visions for the company and the shortcomings of the opposing group’s ideas.

At the annual shareholders meeting held on March 13, CPS’ slate of directors was elected by a significant margin, replacing longtime directors Thomas Murnane and Robert Bernstock, as well as chairman Ed Holman.

CST Brands Inc.

During a recent earnings conference call, CST Brands CEO Kim Bowers stated that the company, which was spun off from Valero Energy Corp. in May 2013, had met its store targets for 2013 by opening 15 new stores in the United States and seven in Canada. She added that the company plans to build 30 new stores in the U.S. and eight new stores in Canada during 2014.

Part of CSP's 2014 Convenience Top 101 retailers


By Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC
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