Insider's View: M&A Market Just Beginning to Pick Up

Two blockbuster acquisitions lead capital-markets review of Q2 2014

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

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SCOTTSDALE, Ariz. -- The second quarter of the year is historically the slowest period in terms of merger-and-acquisition activity in the convenience-store industry. However, such was not the case in the second quarter of 2014.

In fact, two blockbuster transactions were announced during the second quarter—Energy Transfer Partners’ acquisition of Susser Holdings Corp. and the acquisition of the retail convenience-store assets of Hess Corp. by Marathon Petroleum Corp.’s Speedway subsidiary.

Although a sale transaction involving the Hess retail network had been in the rumor mill for some time, most industry observers expected Hess Corp. to complete a spinoff of the retail assets to its shareholders. Not only was the Hess transaction unexpected, the sale price and rumored EBITDA multiple paid raised eyebrows throughout the industry.

It is difficult to determine the exact multiple that Marathon paid for the Hess assets, but industry analysts have speculated that the multiple was anywhere from 10x to 14x.  Regardless of the actual multiple that was paid, all sophisticated industry analysts concluded that the price and the multiple were “off the charts.” Marathon has indicated that it believes that the price was justified by the synergies that the company will be able to realize by the combined entity. Only time will tell if those predictions come true.

At the other end of the spectrum, the ETP acquisition of Susser Holdings caught everyone by surprise. Susser Holdings and its CEO Sam L. Susser are generally regarded as the “gold standard” in the industry. Although it did not appear that Susser was looking to be acquired, the offer from ETP, and the multiple that it represented (thought to be about 10x) was certainly difficult for Susser Holdings to turn down.

The price to be paid by ETP is a 40% premium to the stock price on the day the transaction was announced. In addition, as both companies stated in their press releases and other interviews, this combination of the ETP/Sunoco and Susser networks will significantly expand the footprint of ETP into the highly attractive Texas marketplace and create synergies between the two companies.

Beyond the two blockbuster acquisitions, both 7-Eleven Inc. and CST Brands Inc. announced divestitures of non-strategic assets during the quarter. NRC Realty & Capital Advisors, Chicago, is handling both of these transactions. 7-Eleven is selling 75 gas stations and convenience stores in 16 states, and CST Brands is selling 100 gas stations and convenience stores in nine states. In both instances, the companies stated that they were selling these assets because they did not fit into their corporate strategies.

As companies continue to acquire large companies or portfolios of stores, the divestiture of noncore assets would seem to be an attractive strategy when a buyer must take all of a seller’s assets in an acquisition. It’s likely that this trend will continue in the future as the pace of large acquisitions continues to accelerate.

CONTINUED: A Breakdown of Major Deals

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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