WESTLAKE, Ohio --TravelCenters of America LLC may be on the prowl for additional convenience store deals following its acquisition of 31 Minit Mart c-stores in Kentucky and Tennessee for $67 million from Fred's Minit Mart LCC, Bowling Green, Ky., in late 2013.
"The pipeline of acquisition activity … in the truckstop space is modest," Thomas O'Brien, managing director, president and CEO of TravelCenters of America said during the company's call to announce the financial results for its fourth quarter and year ended Dec. 31, 2013.
"It isn't as robust as it was say two years ago," he said. "In part, I think that's because we've shaken enough a lot of trees. … Competitively, [on] the truckstop side, we're really looking in large part for something different than our competitors are. We're looking for large facilities where we can offer an array of amenities where that's not required element and doesn't seem to be even a preferred element for [the] bulk of our large competitors."
But on the convenience store side, "We're looking at a number of additional groups of c-stores and whether something comes about or not, time will tell," he said. "We're certainly on the c-store side competitively."
Although there has been a lot of attention on bigger deals such as Energy Transfer Partners' acquisition of Susser's Stripes and Marathon-Speedway's acquisition of Hess' retail network, O'Brien said he sees a "fair amount of activity and opportunity in that 20-to-50-store … range" of Minit Mart.
He offered some details on how the company looks at c-stores. "Unlike some of our truckstop competitors, we have a very large, very robust branded gasoline program. And so, I think that versus a local or regional operator that gives us some operating advantage on the fuel side because we are in fact a national jobber for so many different brands. … For us there are efficiencies that we can bring to bear for the regional operator."
Although he would not disclose a figure, he said that the multiple that the company paid for Minit Mart was "substantially less than some other things that you're seeing reported for some of the larger acquisitions over the last couple of months. Whether or not that kind of pricing will trickle down into the size that we're talking about, I haven't seen it yet. I'll never say never, but those kinds of purchases--particularly the two bigger ones that you've seen--seem to be very, very strategic," O'Brien said.
He continued, "Our appetite for acquisition of those kinds of projects would wane if that's the kind of assumptions and multiples that we would have to take on to be able to acquire them. So, as long as it's in our interest and so long as a c-store acquisition is at least is profitable [as] travel center acquisition or travel center development--and we expect to take on a couple of new developments over the next year or two--then it's interesting to me. Because we can do it and we have identified certain advantages. Absent those things and it becomes less interesting."
O'Brien described the company's view as the "expansion or the widening of the road into c-stores. I think that's to a large extent opportunistic. If that is a big part of our future acquisitions, that increase will also be opportunistic."
If pricing "gets out of hand for c-stores of the kind of that we think are interesting to us then we will conclude very rapidly that isn't an opportunity for us," he said. "The truckstop space [is] still out there. … That's our core business, and so we will always have our eye opened for that."
The company will always be interested in "improving [its] national footprint. There are some areas of the country where there's not a TA for a couple of hundred miles. There's a lot of areas of the country where we'd really like to be."
The company is laying the groundwork for that expansion with a "three-pronged approach," he said, "development, acquisition of travel centers and potential acquisition of c-stores. The reason that makes sense by large is because the returns that we're seeing are about equal in all three buckets. If that changes, we will change our mix."
O'Brien also briefly addressed the diesel fuel rebate scandal plaguing rival truckstop chain Pilot Flying J, Knoxville, Tenn.
"The rebate underpayment issue at our principal national competitor continues to be reported in the media. We have seen some customer movement towards TA and we recently converted one approximately 3,000-truck customers to fuel with us," he said. "While I cannot and do not claim a direct cause and effect relationship here, actually I believe this customer assessment of the fuel supply needs is based on largest part and our continued ability to be competitive on price and second to demonstrate beyond a doubt our value proposition in delivering superior amenities and services."
Westlake, Ohio-based TravelCenters of America reported that net income for fourth-quarter 2013 improved by approximately $14.4 million, to $12 million, versus a net loss for the 2012 fourth quarter of $2.5 million. For the year ended Dec. 31, 2013, it reported net income of $31.6 million, compared to $32.2 million for full-year 2012.
At Dec. 31, 2013, TravelCenters of America's business included 247 travel centers, 172 of which were operated under the TravelCenters of America or TA brand names and 75 of which were operated under the Petro brand name. At Dec. 31, 2013, TA also operated 34 convenience stores with retail gasoline stations, primarily under the Minit Mart brand name.
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