Mergers & Acquisitions

The C-Store Industry’s Biggest Deal Ever

A look at how M&A is allowing 7-Eleven and the entire industry to evolve

CHICAGO — 7-Eleven Inc.’s pending acquisition of Marathon Petroleum’s nearly 4,000 Speedway convenience stores will constitute its biggest deal ever. In fact, at $21 billion, it will be the biggest acquisition in the history of the U.S. c-store industry in terms of size and price tag for a purchase that doesn’t also include a refinery.

The deal illustrates a pattern of consolidation in the industry over the last two decades, and a look at the top 10 deals since the turn of the 21st century reveals a pattern that can be described as bigger fish swallowing big fish. The leaderboard of top deals shows ongoing consolidation under a few big companies—7-Eleven, Alimentation Couche-Tard and EG Group—that have systematically carved up and absorbed leading c-store brands in recent years.

Some of the transactions involve the same stores changing ownership multiple times over the years as the consolidation moves forward. Sometimes the acquired brands survive; sometimes they do not. For example, while they have undergone refreshes over time, many stores under the Circle K brand have endured, moving from owner to owner, each expanding and strengthening the portfolio. Sometimes the deals involve rebranding, as in The Pantry’s Kangaroo Express sites or CST Brands’ Corner Stores becoming Circle K stores. But Couche-Tard has not rebranded Holiday Stationstores, demonstrating a willingness to maintain a strong retail brand even as the company extends the Circle K brand to stores across several countries.

Many of the Speedway stores that 7-Eleven is acquiring have for part of their existence been Hess Express, SuperAmerica (owned by Marathon twice) or Giant stores. Now they await the decision of whether they will remain Speedway or adopt the 7-Eleven brand. There is precedent for retailing the Speedway brand. Stripes c-stores have so far survived being sold, first to Sunoco and then to 7-Eleven, largely on the strength of the Laredo Taco foodservice brand.

But despite the seemingly inevitable flow toward consolidation, there are still many more deals waiting to be made of all shapes and sizes.

“While the convenience-store industry has undergone some consolidation, it is still a very fragmented industry and will continue to be for a very long time,” says Joe DePinto, president and CEO of 7-Eleven Inc., Irving, Texas. “There has always been merger and acquisition (M&A) activity in this industry at varying levels.”

While the coronavirus slowed M&A down, he believes that consolidation will continue, and that’s good for the channel as a whole. “We continue to evolve as an industry, and M&A has accelerated our evolution. We’re certainly providing more innovation and better convenience than ever before, which is good for customers and provides them with a more convenient experience,” says DePinto.

A large portion of the c-store industry, however, still consists of retailers with one to 10 stores. “Our industry has many small, independent operators because the barriers to entry are minimal and the business model fosters entrepreneurship,” he says. “I believe that our industry will remain very fragmented with a very long tail of small, independent operators. Convenience is always going to be important to customers, and proximity matters. While this may evolve over time, there will always be independent entrepreneurs willing to enter our space.”

Aspirational Growth

7-Eleven has always been focused on growth, through both organic means and acquisition, DePinto says. The company has a stated target of 20,000 U.S. c-stores. “Growing to 20,000 stores is an aspirational goal for us,” he says. “Under our current leadership team, we grew globally from 29,000 stores in 2005 to 71,800 stores today. We continue to see opportunities broadly throughout North America, and we will continue to pursue those if and when they make sense.”

Reaching that goal won’t be easy, says Mark Radosevich, president of PetroActive Services LLC, Miami.There aren't many sizeable deals left out there, and growing organically to scale seems remote given the complexities of finding and acquiring appropriate real estate and constructing modern c-store facilities. It's not as simple a grassroots growth process like dollar stores enjoy, popping out of the ground in seemingly obscure locations overnight.”

7-Eleven is developing a dual strategy for growth, says Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, Scottsdale, Ariz. “They're building new stores. They're buying portfolios. There's almost no deal too small for them. They can do a five-store deal, and they can do a 3,900-store deal.”

"The continued consolidation has a ripple impact on almost every aspect of the industry."

Ruben says this consolidation is going to continue to put pressure on small to midsized operators. “The market power of the two or three or four major players is going to continue to accelerate, and that’s going to give them a competitive advantage and give the smaller guys a disadvantage,” he says. “It’s pretty hard to compete with these guys that have 9,000 stores if you’re a 20-store operator. That’s going to continue to put pressure on the small to midsized operators, those with maybe 25 to 75 stores. If you have a company that is thinking about selling and may not have a succession plan, those deals make sense.”

About the pending 7-Eleven/Speedway deal, Roger Woodman, managing director at Raymond James Financial, St. Petersburg, Fla., says, “While this acquisition combines two of the top three chains in the United States, their total store count still represents less than 10% of the total market.” There is still a “tremendous opportunity” for the consolidation to continue, he says.

“The continued consolidation has a ripple impact on almost every aspect of the industry, especially when it occurs in the non-independent industry segment,” says industry consultant Steve Montgomery, president of b2b Solutions Inc., Lake Forest, Ill. “Consolidation often means fewer personnel are needed as functions are combined. Vendors have fewer companies to sell to, meaning the loss or gain of any one contract has a larger impact on their business. Trade associations have fewer members, and fewer companies means fewer employees to attend their trade shows.”

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