Mergers & Acquisitions

Fortress Forges United Oil Acquisition (Slideshow)

Private-equity group picks up L.A. c-store chain famous for its cutting-edge architecture

LOS ANGELES -- With several investments in the mid- and upstream oil sectors, Fortress Investment Group, a New York-based investment management firm, has made a splash in the downstream segment with its acquisition this week of United Oil Co., an architecturally edgy gas station and convenience store retailer.

United Oil (CSP Daily News / Convenience Stores / M&A)

Though financials were not disclosed, one source told CSP Daily News that the deal could have closed for at least $500 million. What is known: Fortress has obtained a strong West Coast platform that stretches from Los Angeles to San Diego and positions the investment group for additional acquisitions.

United Oil, based in Gardena, Calif., was family-owned and founded in 1948. It operated more than 130 sites in the Los Angeles and San Diego metropolitan areas, including around 40 kiosk-style operations. Many of the company's c-stores feature stunning, award-winning architecture. Some locations are branded by the fuel brand, while others carry the United Oil name, with the convenience stores branded We Got It! Food Mart.

Watch the slideshow below, and click here to view other images showing United Oil's many architectural designs.

United Oil is also a distributor of Shell, ConocoPhillips (76) and Valero brand fuel in Southern California and delivers fuel to approximately 100 dealer sites.

United Oil is the trade name for United El Segundo Inc. and Apro LLC. Apro is 50% owned by United, with the other 50% owned by World Oil Corp., a privately held company that owns and operates gas stations, refineries and other petroleum-related businesses in California.

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Calls to United Oil's former president Ron Appel, his son and former vice president Jeff Appel, World Oil and Fortress Investment Group were not immediately returned. Jeff Appel, an architecture fan, was the driving force behind the c-store chain's embrace of innovative design, with locations modeling a range of architectural styles from futuristic to Mediterranean to Old West themed. CSP Daily News did learn that both executives left the company headquarters last week with the sale.

Joe Juliano, former group president of Orange, Calif.-based distributor SC Fuels, is now president and CEO of United Oil.

According to one financial expert interviewed by CSP Daily News who is familiar with the background of the sale, the Appels retained an Australian-based financial advisor, Macquarie Capital, last year, looking to fetch at least $500 million for the assets that stretch from Los Angeles to San Diego.

"This thing's been going on for a year, and I know of several parties who have looked at the [assets]," said the source, who spoke on condition of anonymity.

The financial expert observed that while many of United's retail network are kiosk-only with limited retail potential, the company is a high-throughput fuel operator with strong real-estate assets. 

As for the buyer, Fortress Investment Group has offices in Los Angeles and is familiar with United Oil's holdings. Its private-equity business includes a focus on the transportation and infrastructure sector.

Yet, the deal is surprising to the financial expert CSP Daily News interviewed, considering that Fortress' retail background is anchored more in restaurant acquisitions.

"This is their first deal that I'm aware of on the fuel side," he said. "On a deal like this, a private-equity group has to layer in the overhead when factoring the multiples. It's not like a convenience chain that already has the operating infrastructure in place.

"I'd be interested to know what their intentions are," he continued. "Are they using this deal as a platform for additional acquisitions? Who's going to run the operations? I think this is as much a real-estate play as anything else."

Macquarie Capital acted as financial advisor to United Oil, while Glaser Weil Fink Howard Avchen & Shapiro LLP and Mark B. Gilmartin, Esq. acted as legal counsel to Apro LLC and United. Latham & Watkins LLP represented World Oil. Sidley Austin LLP acted as legal counsel to Fortress.

Roger Howard, partner and co-chair of the real-estate department at Glaser Weil Fink Howard Avchen & Shapiro, said, "Being one of the largest transactions in California to date this year, our team put in herculean efforts over the past 18 months to consummate the transaction."

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