2019 Year-End Report: Top 5 M&A Moves

CHICAGO — For convenience-store mergers and acquisitions, 2019 was a year of big, bold moves—not only large deals but also unexpected spinoffs and sales. The changes involved transformative transactions, with players being added and pieces coming off the industry chessboard.

Here are the top five M&A deals that changed the convenience landscape in 2019 …

Consider 2019 the year that Speedway received a green light toward independence after years of effort.

In 2016, activist investor Elliott Management Corp. pushed for refiner-marketer Marathon Petroleum Corp. to spin off its Speedway c-store subsidiary. The next year, Marathon Petroleum conducted a “rigorous and independent” review and decided to keep the retail network, citing that an integrated business created the greatest value for shareholders, seemingly putting an end to the issue.

An integrated company, Marathon Petroleum, Findlay, Ohio, operates 16 refineries and owns midstream marketer MPLX. Its marketing system consists of about 7,800 branded U.S. locations, including about 5,600 Marathon-branded retail outlets. Speedway, Enon, Ohio, includes about 4,000 c-stores in 30 states, primarily under the Speedway brand. Speedway is the third-largest U.S. c-store chain by number of company-owned locations, according to CSP’s2019 Top 202 ranking of c-store chains by total number of retail outlets.

The activist investors tried again in 2019. Citing underperformance, Elliott Management sent a letter to the Marathon Petroleum board with a plan “to unlock the value currently trapped in Marathon’s conglomerate structure” by splitting it into three independent businesses: refining, midstream and retail. In late October, Marathon Petroleum officially announced its intent to spin off Speedway to form an independent, publicly traded company.

What changed? While investor pressure played a major part in the decision to spin off Speedway, it was not the only catalyst, according to Marathon Petroleum. The company’s $23.3 billion merger with Andeavor, formerly Tesoro Corp., in 2018 set the stage for the spinoff. Through an ongoing internal initiative called Project Uplift, the Marathon Petroleum board examined the value of all business segments and determined that Andeavor’s retail brands—SuperAmerica, Giant, Howdy’s and others—“did not have a singular focus,” said Gary Heminger, Marathon Petroleum’s chairman and CEO.

The board decided to rebrand the sites to Speedway “and then to drive synergies beyond that,” he said. “Carrying these synergies further, it just became evident, and a compelling story, that now is the time” for the Speedway spinoff.

Marathon Petroleum expects to complete the separation by the end of 2020, subject to final approval by the board and closing conditions, Heminger said. The new Speedway will be the largest U.S.-listed convenience store operator with a coast-to-coast retail network and a nationally recognized brand.

The British aren’t coming. They’re here.

EG America is slated to move its headquarters in January from Cincinnati—home of its first acquisition, Kroger’s c-store network—to Westborough, Mass., headquarters of its most recent purchase, Cumberland Farms.

The move is emblematic of EG America parent EG Group’s U.S. invasion. Within two years, EG went from unknown to upstart, immediately grabbing a prominent place among the top c-store industry players through its 2018 acquisitions of Kroger’s 762 c-stores and 226 Minit Mart c-stores from TravelCenters of America, Westlake, Ohio. Then in 2019, it added to the store count with 70 sites from Certified Oil, Columbus, Ohio; 54 stores from Fastrac, Syracuse, N.Y., and 562 stores from Cumberland Farms.

Today, EG America’s network includes about 1,680 U.S. c-stores in 31 states, selling more than 2.5 billion gallons of fuel and having annual merchandise sales of more than $3 billion, putting it in the top five c-store chains in the United States.

Cumberland Farms is an “outstanding portfolio of large, modern facilities,” said Zuber Issa, co-founder and co-CEO of EG Group, Blackburn, U.K. “It is rare that an asset of this quality becomes available.”

Another rapidly expanding chain that underwent transformative change in 2019 is West Des Moines, Iowa-based Yesway.

Brookwood Financial Partners, a Beverly, Mass., real estate and private equity investment and asset management company, founded BW Gas & Convenience Holdings LLC, dba Yesway, in 2016, with about 30 stores acquired mostly from Des Moines-based Kum & Go LC. The chain reached its 150-store milestone in 2018.

Then, with one transaction, the November 2019 acquisition of Allsup’s Convenience Stores, Yesway tripled the size of its retail network and has risen up CSP’s Top 202 c-store industry ranking, moving from No. 43 on the 2019 list, with 150 locations, to No. 18, with more than 450 stores in nine states.

Yesway quickly annexed territory as it grew, moving from Iowa to Kansas; to Texas, Oklahoma, Arkansas and Missouri; then to Wisconsin; and to South Dakota, Wyoming and Nebraska. Yesway is not rebranding the stores, deciding to keep the regionally iconic Allsup’s brand. Yesway also named Allsup’s president Mark Allsup as president of the combined company.

The deal adds New Mexico but also shifts the company’s footprint dramatically. “This changes our center of universe a little bit geographically, in that we’ll have a large concentration of the combined portfolio really in two states,” Yesway CEO Thomas Trkla said, those states being Texas and New Mexico.

The year 2019 was a transformative one for Alimentation Couche-Tard Inc., but even more so for its former asset, CrossAmerica Partners LP, which went through several iterations—only to return to its roots.

In November, following a strategic review, Couche-Tard sold its ownership interest in wholesale fuels distributor and convenience-store lessor CrossAmerica to founder Joe Topper for an undisclosed amount. The Allentown, Pa.-based company distributes fuel under various brands to approximately 1,300 locations and owns or leases more than 1,000 sites in 31 states.

Laval, Quebec-based Couche-Tard acquired CrossAmerica GP LLC, the general partner of CrossAmerica, as part of its acquisition of CST Brands Inc. in 2017.

In the sale to Topper, Couche-Tard will transfer U.S. wholesale fuel supply contracts covering 387 sites and 45 fee and leasehold properties to CrossAmerica, and CrossAmerica will transfer its 17.5% interest in CST Fuel Supply LP to Couche-Tard. Couche-Tard will retain its dealer sites in California and those operated through RDK Ventures LLC, a joint venture with Shell Oil Products U.S., as well as other strategic fuel wholesale assets around the country.

In June, CrossAmerica fully exited retail with its sale of 46 sites in the upper Midwest to Dublin-based Applegreen PLC, enabling it to focus fully on its wholesale business.

The sale to Topper and asset exchange with CrossAmerica “allows us each to focus on growing our core business, unimpeded by geographic overlap,” said Brian Hannasch, president and CEO of Couche-Tard, on the company’s fiscal first-quarter earnings call. “Proceeds from the sale will help us accelerate our organic initiatives.

“We do believe we will continue to have opportunities to work with CrossAmerica in the future, whether that be on joint M&A or continued exchanges of assets,” he said.

Aggressive acquirer GPM Investments finished 2019 with two acquisitions that allowed it to potentially claw its way up the CSP Top 202 rankings. That is no small feat, given the number of units a chain needs to add to move higher in the top tier of retailers.

In December, Richmond, Va.-based GPM signed an agreement to acquire the wholesale fuel distribution operations and retail assets of Empire Petroleum Partners, Dallas (No. 91). Empire Petroleum distributes fuel under multiple brand in the Mid-Atlantic, Southeast, Southwest and Midwest. GPM said the combined entity distributes 2.5 billion gallons of fuel annually across more than 2,800 sites in 33 states and Washington, D.C.

The acquisition expands GPM’s operations into 10 new states and adds more than 225 controlled locations, including 148 where GPM owns the property the business sits on or the fuel piece of the business, as well as 77 retail sites.   

And while acquisitions are a regular part of the c-store landscape, the play-by-play can get complicated when deals happen within deals.

In December, GPM took ownership of the Riiser convenience-store chain of 63 c-stores in Wisconsin from Riiser Fuels LLC, Wausau, Wis. That acquisition brings the RStore, Mad Max and Jetz brands into the GPM fold and marks the company’s entry into Wisconsin.

But GPM got an extra bonus: Before the deal was completed, Riiser Fuels purchased Marshfield, Wis.-based Baltus Oil Co.’s eight Bread and Butter Shop c-stores in Wisconsin. These stores also join the GPM portfolio of brands.

GPM operates or supplies fuel to more than 1,400 stores in 23 states: Arkansas, Connecticut, Delaware, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia and Wisconsin. Its convenience-store brands are Fas Mart, Shore Stop, Scotchman, BreadBox, Young's, Li'l Cricket, Next Door Store, Village Pantry, Apple Market, Jiffi Stop, Admiral, Roadrunner Markets, Jiffy Food Marts, E-Z Mart, 1 Stop, TownStar, RStore, Mad Max, Baltus and Jetz.

Click here to view the complete Top 202 list.