Mergers & Acquisitions

'Eye-Popping Multiples' on Their Way in Fourth Quarter?

M&A, capital markets review: Q3 2013

SCOTTSDALE, Ariz. -- Although there were no blockbuster merger and acquisition deals in the convenience store industry announced during the third quarter of 2013, some significant transactions occurred.

Dennis Ruben

GPM Investments LLC closed on its purchase of the Southeast Division of VPS Convenience Store Group LLC, consisting of 263 company-operated and 33 dealer locations. Many of the major c-store operators, such as Susser Holdings Corp., Casey's General Stores Inc. and Wawa Inc., continued their aggressive strategies of new-store development in existing and new markets. Other major retailers, such as The Pantry Inc., continued their store-optimization programs by either remodeling profitable stores or closing underperforming locations.

There was also significant activity in the master limited partnership and initial public offering arenas, with a number of companies going public during the quarter, including Phillips 66 Partners LP, Western Refining Logistics LP and Murphy USA Inc.

Lehigh Gas Partners, Allentown, Pa., closed on two significant acquisitions in Tennessee, which was a new market for Lehigh. Those acquisitions added nearly 50 properties to its portfolio. Some of the major industry participants, such as Alimentation Couche-Tard/Circle K and 7-Eleven Inc., were relatively quiet during the quarter, but based upon comments from the chief executives of both companies, their commitment to growth through acquisitions remains strong. It will also be interesting to see how the Hess Corp. drama plays out and whether its network of 1,360 gas stations will be sold or spun off into a separate business.

One recurring trend that we have continued to witness is the resilience of the c-store industry in general and the apparent limitless appetite for buyers who are looking to acquire quality stores in good locations with solid financial performance. Based on recent publicly announced transactions with which we are either familiar or in which we have been involved, the demand for quality c-store assets has far outstripped the supply, and the EBITDA multiples that buyers are paying for such assets have either remained at high levels or even increased in recent months. It will be interesting to observe whether these trends continue.

On to the news from the third quarter:

Hess Corp.

Hess Corp., New York, retained Goldman Sachs Group Inc. to sell its gasoline station network, which consists of approximately 1,360 stations located in 16 Eastern states. More than 90% of the stores are company-operated and include c-stores. It is our understanding that an offering memorandum has been prepared and is being reviewed by a select group of potential purchasers. Estimates of the value of the gas station portfolio have varied widely among industry analysts, ranging from $1.2 billion to as much as $3.4 billion. Although Hess hired Goldman to explore the sale of its retail network, the company has indicated that it may elect to pursue a spinoff of the network into a separate business instead.

7-Eleven Inc.

In an interview with Bloomberg, Toshifumi Suzuki, the CEO of 7-Eleven's parent company, Seven & I Holdings Co., said that the company has a renewed focus on growth in the United States. Suzuki stated that 7-Eleven will raise the quality of stores and will continue its emphasis on acquisitions.

7-Eleven, Dallas, opened a new high-tech store in the heart of New York City's Financial District. The store has seating for 25 people, touchscreen ordering from a made-to-order café and flat-screen TVs. The store, which opened in July, seems to be redefining New Yorkers' perceptions about c-stores.

Alimentation Couche-Tard Inc./Circle K

Although no new significant acquisitions were announced by Alimentation Couche-Tard/Circle K during the third quarter, president and CEO Alain Bouchard stated during an investor conference call that the company continues to be active on the acquisition front and that there are currently several opportunities under review.

Although there has been widespread speculation that Couche-Tard, Laval, Quebec, would be a potential acquirer for Hess Corp.'s retail network, the company has not publicly commented on those rumors. Couche-Tard acquired two company-operated stores and completed the construction of eight new company-operated stores for a total of 47 new stores during fiscal year 2013.

Susser Holdings Corp.

Susser Holdings Corp., Corpus Christi, Texas, continued its aggressive growth strategy, opening six new large-format Stripes c-stores during the second quarter and an additional six during the third quarter, bringing the total new store builds for the year to 16. Susser Petroleum also completed a $13.3-million sale-leaseback transaction for four Stripes stores in August.

Since its initial public offering in September 2012, Susser Petroleum has completed sale-leaseback transactions involving 26 Stripes stores for a cumulative cost of $103 million. Susser Holdings also completed the acquisition of Gainesville Fuels Inc., Gainesville, Texas, which operates a wholesale and lubricants distribution business selling approximately 60 million gallons of diesel annually to oil and gas producers in northern Texas and southern Oklahoma.

MLP, IPO & Joint Venture Activity

  • Phillips 66 Partners LP, a subsidiary of Phillips 66, Houston, launched an initial public offering of 15 million common units, representing limited partner interests. Phillips 66 Partners will own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquid pipelines and terminals, and other transportation and midstream assets. The units will trade on the New York Stock Exchange under the ticker symbol "PSXP."
  • Western Refining Inc., El Paso, Texas, filed a registration statement for the formation of a master limited partnership spinoff of certain assets to Western Refining Logistics LP. The newly formed entity will own, operate, develop and acquire terminals, storage tanks, pipelines and other logistics assets primarily in the southwestern United States. The company will trade on the New York Stock Exchange under the symbol "WNRL".
  • In September, Murphy Oil Corp., El Dorado, Ark., completed the spinoff of its retail marketing business to a newly created entity, Murphy USA Inc. Shares of the new company trade on the New York Stock Exchange under the symbol "MUSA."
  • Petroleum marketer F.L. Roberts & Co. Inc. and supermarket chain Big Y Foods Inc. have partnered in a new venture to develop their own brand of c-stores with fuel under the name Big Y Express. The first facility will open this fall in Lee, Massachusetts.

Notable M&A Transactions

  • GPM Investments LLC, Richmond, Va., closed on its purchase of the Southeast Division of VPS Convenience Store Group LLC, which consists of 263 company-operated units and 33 dealer locations in the Southeast. GPM also entered into an agreement with Hurst Harvey Oil Inc., a family-owned and operated business in Virginia, to purchase five Get & Zip c-stores. GPM currently operates 55 Fas Mart c-stores in that part of Virginia. Click here to read extended coverage of GPM's latest ventures.
  • Lehigh Gas Partners LP purchased 30 gasoline stations in the Knoxville, Tenn., market from Rocky Top Markets LLC and Rocky Top Properties LLC. As part of that transaction, Lehigh entered into leases for four stations, assumed seven third-party supply contracts and purchased certain equipment and other assets at the sites for a total consideration of $36.9 million. In a complementary acquisition, Lehigh Gas Partners LP purchased 14 Zoomerz gas stations in eastern Tennessee from Rogers Petroleum Inc. and affiliates, assumed the leases for three stations and purchased certain other assets and equipment at the 17 sites for a total consideration of $21.1 million.
  • South Florida Commercial Properties LLC, an affiliate of Marvin Hewatt Enterprises, Lawrenceville, Ga., acquired 20 Chevron stations in south Florida.
  • PAPCO Inc., Virginia Beach, Va., acquired the Tidewater Retail Assets, consisting of 23 Shell-branded gas stations and one Exxon location in southeastern Virginia and various supply contracts from SMO Inc., a wholly-owned subsidiary of The Wills Group Inc.
  • GF Convenience LLC, a subsidiary of Gier Oil Co. Inc., Eldon, Mo., and operator of the Eagle Stop chain of c-stores in Missouri, added 11 more stores through the purchase of Mertens Oil of Jefferson City, Mo.
  • Grand Rapids, Mich.-based WNS Holdings LLC, which owns 12 Short Stop gas stations, acquired four D&C Gas and Convenience stores in Duluth, Minn., from Don and Cathy Letourneau.
  • Appleton, Wisc.-based U.S. Oil, the petroleum and renewable energy distribution division of U.S. Venture Inc., acquired Combined Oil, a branded wholesale fuel supply business that supplies more than 160 c-stores throughout southern Wisconsin, Illinois, Indiana and Kentucky.
  • Finally, Tesco PLC, London, has agreed to sell most of its Fresh & Easy Neighborhood Markets Inc. small-format grocery business to YFE Holdings Inc., an affiliate of Yucaipa Cos. LLC. Yucaipa will acquire more than 150 stores as well as Fresh & Easy's Riverside, Calif., distribution and production facilities. More than 4,000 employees will also transfer to the new business. It is anticipated that the transaction will close before the end of the year.

Oil Company Initiatives

Tesoro Corp., Houston, completed the sale of all of its interests in Tesoro Hawaii LLC to Hawaii Pacific Energy LLC for approximately $225 million, which includes net working capital. Tesoro Hawaii operates the Kapolei refinery, a network of about 30 retail stations and associated logistical assets. Hawaii Pacific Energy LLC is a wholly-owned subsidiary of Par Petroleum Corp. of Houston.

Retail Initiatives

  • San Antonio, Texas-based CST Brands Inc., which was spun off from Valero Energy Corp. as a separate company on May 1, announced that it was on track to open seven additional stores in the United States and six in Canada by the end of this year.
  • The Pantry Inc., Cary, N.C., is continuing its store portfolio optimization strategy and is selectively building new stores and remodeling or closing existing stores in connection with that strategy. The company completed 31 remodels during the third quarter, bringing the year-to-date total to 41. More than 50 projects are currently under way, president and CEO Dennis Hatchell said during a recent investor earnings call. The Pantry plans to have 70 to 80 remodels completed by the end of this year.
  • Casey's General Stores Inc., Ankeny, Iowa, opened four new stores and acquired three others during the first quarter of its new fiscal year. It also completed five replacement stores, bringing its total store count to 1,749. President and CEO Robert Myers indicated that the company's pipeline of new store construction and potential acquisitions is the strongest it has been in recent history. Casey's has 31 new stores and 18 replacement stores under construction and anticipates opening 40 to 45 new stores by the end of its fiscal year, many of which are located in newer markets in Arkansas, Tennessee and Kentucky.
  • Delek Holdings' Mapco, Brentwood, Tenn., is embarking on a new store construction and rebranding program, and intends to build 20 new stores a year. They intend to complete 12 new stores by the end of this year.
  • Holiday Stationstores, Minneapolis, reached an agreement with I-90 Fuel Services Inc. to convert 16 of The Gas Stop c-stores to Holiday Stationstores, expanding the Holiday brand in the South Dakota and southwestern Minnesota markets.
  • Kwik Trip Inc., La Crosse, Wis., opened its 400th c-store, located in Chisago City, Minnesota. The company has typically opened between 12 and 15 stores each year and intends to add approximately 15 new locations in 2013. It also is expanding into two new markets: Superior, Wis., and Duluth, Minn.
  • Sheetz Inc., Altoona, Pa., plans to continue its rapid expansion in West Virginia and hopes to open six new stores each year for several years. Sheetz already operates 44 c-stores in the state.
  • Wawa Inc., Wawa, Pa., opened two c-stores in Orlando, Fla., and intends to open an additional seven in that market before the end of the year.
  • Murphy USA Inc., recently spun off from Murphy Oil Corp., broke ground on its first gas station as a publicly traded company. The new store is near its headquarters in El Dorado, Ark.
  • Pacific Convenience & Fuels, Pleasanton, Calif., announced that it will be changing the name at about 300 of its stores in the West Coast region from Circle K to a new c-store brand--My Goods Market.

Getty Realty Corp.

Getty Realty Corp., Jericho, N.Y., announced that it has been successful in repositioning most of the properties previously leased to Getty Petroleum Marketing Inc. (GPMI), which had been the largest tenant of Getty Realty prior to the bankruptcy filing of GPMI and the subsequent rejection of its leases with Getty Realty. During the first six months of 2013, the company sold 77 properties, including two terminals for $26.7 million, primarily through NRC Realty & Capital Advisors, Chicago, which was engaged by Getty Realty to handle the sale. Subsequent to June 30, the company has sold an additional three properties for $24.5 million and one terminal. Since the beginning of 2012 through August of 2013, Getty Realty has sold 134 properties, and currently has 141 properties classified as held for sale.


  • Eugene Crane, as Chapter 11 trustee, is selling five former BP Connect operating c-stores with gasoline in the Chicago metropolitan area, free and clear of all liens. The trustee has engaged NRC Realty & Capital Advisors to handle the sale.
  • In the Jump Oil Co. Inc. Chapter 11 bankruptcy proceeding, the sale of the company's assets was recently completed. Lion Petroleum of St. Louis purchased 32 locations, Casey's General Stores Inc. purchased four sites, and other buyers purchased the remaining 12 sites.


Although the second and third quarters of 2013 were relatively quiet in terms of merger and acquisition activity, the fourth quarter is usually the busiest, as companies attempt to meet their growth targets for the year.

We are aware of a number of large, high-profile transactions that are in the pipeline that should close in the fourth quarter. Several of those transactions involve West Coast real estate and are likely to bring eye-popping EBITDA multiples.

It would seem likely that the Hess Corp. drama will play out during the fourth quarter as well. It would not be surprising to see a number of transactions go under contract early in the quarter and close by year's end. We've already seen major activity with Sunoco Inc.'s recent purchase of Mid-Atlantic Convenience Stores. It will be interesting to see how the remainder of the year unfolds.

Dennis L. Ruben, executive managing director of NRC Realty & Capital Advisors LLC, contributes an annual and quarterly column to CSP, analyzing mergers and acquisitions and key economic trends in the convenience channel. He can be reached at dennis.ruben@nrc.com. He will also headline the Capital Markets Symposium at the 2013 Outlook Leadership Conference, Nov. 9-12 in Scottsdale, Ariz.

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