Mergers & Acquisitions

Acquisitions Continue to Narrow the C-Store Industry Ranks

Land of the giants: The big get bigger as chains go deeper for deals
Photograph: Shutterstock

CHICAGO — As the number of large convenience- store chains shrinks, the giants are looking further down the food chain for acquisitions. Case in point: the acquisition this spring of two New York-based midsize chains. Speedway proved its purchasing prowess with the acquisition of NOCO Express, while Blackburn, U.K.-based EG Group expanded its U.S. empire by acquiring Fastrac Markets.

“It’s a testament to the entrepreneurship of NOCO and Fastrac that they built businesses worthy of major investment by national players,” said Jim Calvin, president of the New York Association of Convenience Stores, Albany, N.Y.

“At the same time, there is lament among industry veterans that midsize, homegrown convenience-store chains are gradually disappearing from upstate New York,” Calvin said. “One can’t help thinking that New York’s increasingly hostile regulatory climate for smaller businesses played a role in these upstate chains being open to entertaining offers.”

It is also a reflection of a larger consolidation trend. The number of chains with four or more stores is down 28% from 2008 and 19% since 2015; most of the growth is happening for chains with 500 stores or more, according to preliminary numbers from the NACS State of the Industry Report of 2018 Data.

“As the gap between the big guys and the little guys keeps widening, we should keep in mind that Marathon itself once had a retail footprint not much bigger than NOCO or Fastrac, and has managed to maintain a solid reputation in our industry as it grew into the largest network of company-operated c-stores in the country,” Calvin said.

Marathon Petroleum Corp. (MPC), Findlay, Ohio, and its Enon, Ohio-based Speedway LLC subsidiary entered into an agreement in April to acquire 33 of NOCO Inc.'s 39 NOCO Express c-stores and a terminal in western New York from the Tonawanda, N.Y.-based energy company. The companies expected the deal to close in late spring.

Marathon Petroleum will rebrand the NOCO locations to Speedway. “The NOCO Express stores have been very well-managed and -maintained and will complement our expanding presence in this region,” said Speedway President Tony Kenney.

“This acquisition supports MPC’s Midwest product placement strategy and builds upon prior investments, including Speedway’s acquisition of 78 Express Mart locations in western New York, to maximize our refinery utilization,” said Marathon Petroleum Chairman and CEO Gary Heminger. “The terminal is well-positioned to receive supply from the Midwest, Canada or the New York Harbor via multiple supply routes, including pipeline, truck, rail or waterborne vessels and deliver our products in this attractive new market.”

In April 2018, Speedway signed an agreement to purchase Syracuse, N.Y.- based Petr-All Petroleum Corp.’s Express Mart c-stores in the Syracuse, Rochester and Buffalo markets for $266 million. Marathon Petroleum later agreed to divest five of the stores to Sunoco LP, Dallas, to settle Federal Trade Commission antitrust concerns.

This April, EG Group reached an agreement to acquire a portfolio of 54 Fastrac Markets in New York in the Rochester, Syracuse and Albany area, in addition to East Syracuse, N.Y.-based Fastrac’s wholesale fuel business. The U.K. c-store and gas station operator has a vision of becoming a leading global retailer, and it now has 5,200 sites across England, Europe, Australia and the United States.

Fastrac owner Tom Waddle and his team “have built an outstanding portfolio of large, modern facilities,” said Jay Erickson, president of EG America, Cincinnati. “We are very impressed by the Fastrac operation, from their unbranded fuel procurement and transportation department to the well-developed signature pizza program. These stores are highly complementary to EG Group’s existing U.S. operation.”

EG Group acquired the more than 760- site c-store business in the United States from Kroger Co. in April 2018 for $2.15 billion. In December, EG Group expanded to about 990 U.S. stores with the acquisition of the 225-unit Minit Mart portfolio from TravelCenters of America, Westlake, Ohio, for $330.8 million. The Fastrac purchase brings the EG Group’s U.S. total to 1,042 stores in 24 states.

The Fastrac acquisition “builds on our foundational network as we bullishly explore further real-estate development prospects and, more importantly, provide growth opportunities in the U.S.,” said Zuber Issa, founder and co-CEO of EG Group.

“We have a firm commitment to growing our presence in the U.S., the world’s largestconvenience market,” says his brother Mohsin Issa, also founder and co-CEO.

As consolidation ramps up with midsize chains, there are still a few pickup opportunities among the largest operators. In April, Oil Price Information Service (OPIS) reported that Cumberland Farms, Westborough, Mass., had retained Bank of America to explore the possibility of selling its retail network. It more than 560 locations in Connecticut, Florida, Maine, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. CEO Ari Haseotes told employees about the exploration of a sale at a company town hall meeting, OPIS said. Cumberland Farms did not respond to CSP’s request for comment as of press time.

“The prospect of a future sale of Cumberland Farms has been bandied about among industry insiders for some time, not surprisingly since the Gulf assets were sold,” said Ken Shriber, managing director and CEO of Petroleum Equity Group, Chappaqua, N.Y. “The market will well-compensate a seller like Cumberland Farms given its asset profile and footprint.” The chain is coming off years of “impressive” site improvements and new development “and would be taking advantage of a ripe seller’s market,” he says.

Cumberland Farms purchased Gulf Oil’s northeastern marketing assets in 1986, and Cumberland Farms and Gulf Oil merged into Cumberland Gulf Group in 2008. In 2015, Boston-based ArcLight Capital Partners acquired Gulf Oil and Cumberland Farms’ dealer business.

OPIS said it expects Cumberland Farms will fetch a price in the billions of dollars. The report cited Alimentation Couche- Tard, Irving Oil, Marathon Petroleum and BP as likely buyers. In 2018, London-based BP teamed up with ArcLight to form a joint venture to acquire Louisville, Ky.-based Thorntons Inc., which—like Cumberland Farms—had been exploring a sale.

Shriber added EG Group to the list of potential buyers, dependent upon its ability to acquire the financing for a transaction he estimates to be worth more than $3 billion.

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