Mergers & Acquisitions

Arko Completes Transit Energy Group Acquisition

Addition of 135 retail stores brings GPM’s banners to 2 new states
arko gpm fas mart
Photography courtesy of GPM Investments

Arko Corp. has completed its acquisition, announced in September, of the assets of Transit Energy Group, which operates 135 convenience stores, supplies fuel to 190 independent dealers and operates a transportation business in the southeastern United States, for $370 million plus the value of inventory. This is Arko’s 23rd acquisition since 2013, and the deal will bring Arko’s retail store base to two new states—Alabama and Mississippi.

TEG is one of the largest privately held portfolios in the Southeast, with banners including Corner Mart, Dixie Mart, Flash Market, Market Express and Rose Mart. The retail segment is comprised of approximately 135 company-operated c-stores in South Carolina, North Carolina, Tennessee, Mississippi, Missouri, Louisiana, Alabama and Arkansas. Many of the stores include food offerings including Baskin-Robbins, Chester’s Chicken, Pizza Inn and Subway franchises.

The acquisition also includes a network of approximately 190 independent dealer locations, expanding the company’s wholesale segment to more than 1,850 sites. Including retail and wholesale, the acquisition will add about 285 million gallons of diesel and gasoline, the majority branded, to the two billion gallons the company currently sells annually.

The transportation business has 58 trucks and 78 tanker trailers that support the retail and wholesale business.

“Arko’s demonstrated history of growing adjusted EBITDA and cash flow by executing the company’s long-term growth strategy—which is enhanced by our integration capacity and ability to add value to newly acquired stores with our merchandising and marketing—is what sets us apart as a convenience retailer,” said Arie Kotler, chairman, president and CEO of Arko. “We believe we can add value to these stores and well-known regional brands with an enhanced offering as we reset these stores. We welcome TEG’s employees to our family of community brands and look forward to working together to grow the business and provide value for customers.”

Stephen Lattig, president and CEO of TEG, said, “Arko has a proven ability to add value to stores with their diverse offerings, and will ably serve our many loyal retail and wholesale customers. TEG would not be the success it is today if it were not for the dedication of its team members. We are excited that our team members are joining a growing and dynamic organization like Arko.”

The total purchase price for the transaction was approximately $370 million plus the value of inventory, of which $50 million is deferred, payable in two annual payments of $25 million on the first and second anniversaries of the closing, which Arko may elect to pay in either cash or, subject to certain conditions, shares of Arko’s common stock. Arko financed approximately $90 million of the nondeferred consideration including the value of inventory and other closing adjustments from its own sources. Oak Street, a Division of Blue Owl Capital, funded the remaining approximately $258 million as part of the existing $1.15 billion agreement by which Oak Street acquired most of the real estate assets of TEG substantially concurrently with the closing of the transaction. Arko now leases these real estate assets from Oak Street.

More Growth

Since 2013, Arko’s systematic growth strategy has increased the company’s cash flow and adjusted EBITDA, it said, transforming it from approximately 200 stores in seven states into one of the largest convenience-store operators in the United States, with more than 1,500 company-operated stores.

“I believe that with Arko’s strong liquidity and proven dealmaking ability, we will continue our long-term growth strategy and grow our convenience-store footprint through disciplined, accretive acquisitions,” said Kotler.

West Memphis, Arkansas-based TEG is owned by ECP Management LP. Founded in 2005, ECP is an investor across energy transition, electrification and decarbonization infrastructure assets, including power generation, renewables and storage solutions, environmental infrastructure sustainability and efficiency and reliability assets facilitating the energy transition.

Richmond, Virginia-based Arko operates in four reportable segments: retail, wholesale, fleet fueling and GPM Petroleum, which sells and supplies fuel to its retail and wholesale sites. GPM Investments owns and operates c-store brands including 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, TownStarr, ExpressStop and Handy Mart.

 

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