RICHMOND, Va. -- As GPM Investments LLC expands its convenience-store network with the expected closing on the acquisition of Admiral Petroleum Co. this week, the company is taking on a new investment partner, a move that GPM’s president and CEO says validates its recent growth strategy.
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As reported in a McLane/CSP Daily News Flash, GPM—operator of the Fas Mart, Village Pantry and other convenience-store chains—is purchasing Admiral Petroleum and its 171 c-stores from Sun Capital Partners Inc.
While the parties have not yet announced the details of the acquisition officially, GPM is expected to take over the stores in Indiana and Michigan during the next two weeks, multiple sources told CSP Daily News.
The deal gives GPM nearly 1,000 convenience stores in the East and the Midwest, making the Richmond, Va.-based chain one of the 10 largest in the U.S. c-store industry.
GPM has been growing in the Midwest. In March 2015, it took ownership of 42 Road Ranger convenience stores in Illinois, Iowa and Kentucky and has converted them to its Fas Fuels brand (Rockford, Ill.-based Road Ranger USA retained its travel centers). In February 2016, it took ownership of 15 Gas-Mart USA Inc. convenience stores in Illinois, Iowa and Nebraska.
Meanwhile, an unnamed private fund has signed a nonbinding letter of intent to buy participation units for $62.5 million from GPM President and CEO Arie Kotler’s Arko Holdings Ltd. and from U.S. investment fund Davidson Kempner, according to Israeli newspaper Globes.
The unnamed fund has tentatively agreed to buy all Arko and Davidson Kempner's new preferred participation units in GPM for $47.5 million. The new units provide a $37.5 million repayment of the investment and an 8.75% annual return. They are equally divided between Arko and Davidson Kempner, so each will receive $23.75 million. After the completion of the deal, the conditions of the preferred units will be changed and they will represent 7.5% of the value of rights in GPM's capital, providing their owners with preferred rights in divided distribution and more.
At the same time, the private fund will buy further 2.5% regular GPM participation units from Davidson Kempner for $15 million. After the sale is completed, Davidson Kempner will control 22.5% of the regular units, while Arko will continue to control 75%.
The unnamed fund may invest an additional $30 million directly in GPM to help expand the partnership, the report said.
The deal reflects a $630 million company valuation for GPM, said Globes, while Arko acquired control in 2011 for only $30 million, and at the end of June, the balance of the investment in GPM on its books was $46 million.
"The fund's entry into GPM at a valuation of $630 million is indicative of the company's achievements in the past few years and of the results of the implementation of the strategic plan, which focuses on expanding GPM's operations and turning it into a leading fuel and convenience-store company throughout the U.S.," said Kotler, above right, who leads Arko as chairman and CEO.
Sun acquires Admiral
Boca Raton, Fla.-based Sun Capital acquired Coopersville, Mich.-based Admiral in May 2016, along with Lemmen Oil Co., Cassville, Mo. The deals included 130 Admiral-branded gas stations and c-stores, as well as nine Lemmen-branded gas stations and c-stores, all in Michigan and Indiana.
Jeff Turpin, a more than 20-year veteran of the convenience-store industry, is CEO of Admiral Petroleum. Turpin previously served as chairman and CEO of VPS Convenience Store Group LLC.
Sun Capital and GPM have a history of deals.
In first-quarter 2015, Sun Capital entered into an agreement for GPM to purchase the Midwest division of its VPS Convenience Store Group LLC, which consisted of 163 c-stores in Indiana, Ohio, Michigan and Illinois under the Village Pantry and Next Door Store brands.
This transaction added to GPM’s acquisition of the Southeast division of VPS in August 2013, which included 263 c-stores under a variety of names. Those stores became a division of the company called GPM Southeast, located in North Carolina, South Carolina, Tennessee and Virginia.