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Mergers & Acquisitions

2018 Top 202: What's Driving C-Store M&A?

CSP explores a raw undercurrent of private-equity money, shareholder activism and asset reshuffling that’s set to inundate the channel

CHICAGO -- Last October, Warren Buffett bet $2.76 billion on fossil fuels and brick-and-mortar.

The Oracle of Omaha, famous for his patient, if not dull, long-term investment strategies, took a 38.6% stake in Pilot Flying J that will mature into an 80% majority ownership by 2023.

Amazon, electric cars, drones—or any of today’s seductive financial machinations—be damned. Buffett, president and CEO of Omaha, Neb.-based Berkshire Hathaway, is dancing with the one he came with.

That said, 2023 is only five years away. How fast is the world supposed to change?

Not that fast, according to Marathon Petroleum. Channeling Buffett’s instincts, the Enon, Ohio-based refiner-marketer and parent of the Speedway c-store chain made a coast-to-coast, $23.3 billion megadeal for San Antonio-based Andeavor in April. The binge doubled down on the nation’s liquid-fuels infrastructure, banking on the current renaissance of U.S. refineries; rising global demand for oil; and the declining but still lucrative U.S. gasoline market.

So what about disruption? Or innovation, for that matter?

“Physical proximity is an amazing cure-all for a lot of things,” says Bill Bishop, chief architect of Brick Meets Click, Barrington, Ill. “In the short term, it’s very good for c-stores.”

Like Buffett, Marathon and probably most convenience retailers, Bishop’s confidence in the c-store-gas model extends at least five to 10 years out. “Longer term, you have the whole question about the role of fuel,” he says. “If people stop buying fuel, it obviously will be a game changer.”

While that slow-closing window probably weighed on some minds at Berkshire Hathaway and Marathon, the two staggering plays also failed to change the highest ranks of CSP’s latest Top 202 c-store ranking. With a year-end cutoff date of Dec. 31, 2017, the five highest-ranking chains maintained their spots from the previous year. (Note: Editors did add the Sunoco deal to 7-Eleven’s numbers because that acquisition closed in January 2018, just after the cutoff, and was extreme enough to warrant an exception.)

What these and other recent mergers and acquisitions did, however, was expose a raw undercurrent of private-equity money, shareholder activism and asset reshuffling that’s set to inundate the channel like pizza wars and vaping.

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