Suitors Aplenty as Pantry Preps for Sale

Stock price rises on report that deal is coming "within days," but with whom?

Greg Lindenberg, Editor, CSP

Steve Holtz, Editor in Chief, CSP Daily News

Pantry Kangaroo Express (CSP Daily News / Convenience Stores)

CARY, N.C. -- Shares of The Pantry Inc. rose 23% on December 17 after The Wall Street Journal reported earlier this week that the convenience store company was close to being sold, said The Charlotte Observer.

So far this year, the company's stock is up 72%, said the Journal.

People familiar with the matter told the Journal that the Cary, N.C.-based company, which does business primarily under the Kangaroo Express convenience store banner, has a market value of $685 million. Using a typical takeover premium, an acquisition of the company could value it at more than $850 million, the newspaper added.

As reported in a 21st Century Smoke/CSP Daily News Flash, The Pantry has hired an investment bank to run an auction. Bids were due last week, the report said, and a buyer could be announced within days.

The identity of that buyer is still a mystery. The spate of recent merger-and-acquisition and industry consolidation activity suggests any number of suitable, sizable candidates to purchase The Pantry, as a whole or in pieces, including:

One industry analyst speculated that Couche-Tard and ETP could be among the bidders for the assets, noting The Pantry's density of stores in the Carolinas as a primary benefit to both; however, he noted, "It's not an easy network to manage; a number of the sites would need improvements."

The analyst, who asked not to be identified, said he does believe a deal could come soon, saying, "When The Wall Street Journal comes out with something, it's usually true." He also said the healthy bump in The Pantry's stock price indicated that "investors are adding a lot of merit" to the rumor.

The prospect of a sale comes at the end of a tough year for senior management at the chain. In the beginning of the year, The Pantry went through a protracted board battle that culminated in an upset vote in which shareholders elected three new directors, overwhelmingly accepting the slate of candidates put forward by "dissident" investment group Concerned Pantry Shareholders. CPS said it is "dedicated to maximizing shareholder value and improving corporate governance" of the company, although it stopped short of pushing for a sale, pushing instead for a new strategy and direction.

As of Dec. 9, 2014, the company operated 1,513 stores in 13 states, mostly in Florida, North Carolina and South Carolina, but also in Georgia, Alabama, Tennessee, Mississippi, Virginia, Kansas, Kentucky, Louisiana, Indiana and Missouri.

Part of CSP's 2014 Convenience Top 101 retailers