Mergers & Acquisitions

Arko Welcomes Uncle’s to the Family

Company completes 24th acquisition, including 24 c-stores, Gascard fleet fueling operations

Arko Corp. has completed the acquisition of the retail and fleet fueling assets of WTG Fuels Holdings LLC, the owner of Uncle’s Convenience Stores and Gascard fleet fueling operations. This transaction marks the 24th acquisition for Arko since 2013, the company said, and the second completed acquisition in the first six months of 2023.

Founded in 1976, WTG consists of 24 company-operated Uncle’s locations in Texas, as well as 68 proprietary Gascard-branded fleet fueling cardlock sites and 43 private cardlock sites. The acquisition also includes nine independent dealer locations and three land parcels.

The total purchase price for the WTG acquisition was approximately $140.2 million plus the value of inventory at closing.

“The WTG acquisition fits squarely in our long-term growth strategy and our commitment to create value for our stockholders,” said Arie Kotler, chairman, president and CEO of Arko. “We believe we will add significant value to the WTG business by leveraging our excellent integration capabilities, and we believe that the WTG business will benefit considerably from our merchandizing and marketing initiatives. We expect that the WTG business’ robust diesel business will advance our fuel strategy to maximize fuel gross profit dollars. We believe that Uncle’s and Gascard are well-positioned to benefit from the scale and expertise at the heart of Arko’s operations, and we welcome them to our family of community brands.”

This acquisition enhances Arko’s footprint in attractive markets and will bring the fas Rewards loyalty program and favorable assortment to a broader group of consumers, it said. Uncle’s stores are popular West Texas destinations that anchor their markets with convenient grocery, beer and fresh food options. The WTG business is known for its food, including Uncle’s-branded fresh food, Hunt Brothers Pizza and Champs Chicken. Certain stores also have walk-in beer caves, and Uncle’s has historically had very strong diesel sales, which accounts for more than 33% of its overall fuel volume, said Arko.

The Gascard-branded fleet fueling cardlock and private cardlock sites represent one of the largest fleet fueling operations in West Texas, Arko said. Nearly 75% of fuel sales by volume at the cardlock locations have been diesel, it said. In addition, the WTG business issues fuel cards that provide customers with access to a nationwide network of fueling sites. Arko’s fleet fueling segment expects to leverage its marketing and operations expertise to manage fleet fueling sites and create value for customers.

Of the total $140.2 million purchase price, Arko financed from its own sources approximately $25.2 million of the cash consideration plus the value of inventory and other closing adjustments. The remaining approximately $115 million was funded by funds managed by Oak Street, a Division of Blue Owl Capital, as part of the existing agreement between Arko and Oak Street, according to which Oak Street acquired the majority of the real estate assets of the WTG business concurrently with the closing of the transaction, and Arko now leases the real estate assets from Oak Street for $6.9 million in annual cash payments. As previously reported, on May 2, 2023, Arko amended its existing agreement with Oak Street, and, in addition to the funding for the WTG acquisition, such agreement currently provides for an aggregate up to $1.5 billion of capacity from the date the amendment was signed through Sept. 30, 2024.

The company expects that the WTG acquisition will add approximately $14.9 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) on an annualized basis after expected synergies.

WTG Fuels, based in Midland, Texas, is a diversified fuels distributor and convenience retailer with operations across West Texas and southeast New Mexico. Prior to the close of the transaction, the company’s assets included Uncle’s, Gascard and a delivered fuels business serving residential and commercial customers. The delivered fuels business, which provides propane, refined products and lubricants to nearly 19,000 residential and commercial customers through a network of more than 70 bulk plants and warehouses, was not included in the sale. WTG Fuels will continue to be operated it post-closing. WTG Fuels is a subsidiary of West Texas Gas, a provider of natural gas gathering, processing, transmission and distribution services throughout Texas and Oklahoma.

Matrix Capital Markets Group Inc., Richmond, Virginia, provided merger-and-acquisition advisory services to WTG, which included valuation advisory, marketing the business through a confidential, structured sale process and negotiation of the transaction.

“Our relationship with WTG first began back in late 2021 as we helped the company evaluate strategic alternatives for the WTG Fuels businesses,” Vance Saunders, managing director for Matrix. “After reviewing several options, the decision was made to divest WTG Fuels’ retail motor fuels, convenience retail and fleet fueling businesses through a carveout process to maximize the value of the company’s assets.”

Arko owns 100% of GPM Investments LLC and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. Based in Richmond, Virginia, its family of community c-store brands includes 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, ExpressStop and Handy Mart.

Arko operates in four reportable segments: retail, which includes c-stores selling merchandise and fuel products to retail customers; wholesale, which supplies fuel to independent dealers and consignment agents; GPM Petroleum, which sells and supplies fuel to its retail and wholesale sites and charges a fixed fee, primarily to fleet fueling sites; and fleet fueling, which includes the operation of proprietary and third-party cardlock locations, and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites.

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