Mergers & Acquisitions

Global Partners 'Had Its Eye' on Warren Equities

Will apply economies of scale to $383 million, complementary c-store acquisition

WALTHAM, Mass. -- In what president and CEO Eric Slifka called "a transformative acquisition for our retail business," Global Partners LP--through its Global Montello Group Corp. subsidiary--has entered into an agreement to buy 100% of the equity interest in petroleum marketer and Xtra Mart convenience store operator Warren Equities Inc. for approximately $383 million.

Warren Equities Xtra Mart Global Partners (CSP Daily News / Convenience Stores / Gas Stations)

"In evaluating opportunities like Warren, we focus not on the historical performance of the assets, but instead perform a bottom-up analysis, instilling our own cost discipline on a store-by-store basis," Slifka said during the company's conference call on the deal. "Applying our expertise in fuel sourcing, merchandising and other areas to these assets, we see tremendous opportunity to drive significantly improved performance, highlighted by topline growth and margin enhancement."

As reported in a 21st Century Smoke/CSP Daily News Flash, Warren Equities sells approximately 500 million gallons of fuel annually through approximately 520 retail locations. Based in Providence, R.I., the company operates 147 Xtra Mart convenience stores, markets fuel through 53 commissioned agent locations and supplies fuel to approximately 320 dealers.

Global Partners' portfolio of company-operated sites, commissioned agents, dealer contracts and gas stations will increase by approximately 50% to more than 1,500 locations, Slifka said.

Warren Equities operates in 10 states: Massachusetts, Connecticut, Maine, New Hampshire, New York, Rhode Island, New Jersey, Pennsylvania, Maryland and Virginia. In addition to its proprietary Xtra Fuels brand, the company markets fuel through several major brands, including Exxon, Mobil, Shell, BP, Sunoco, CITGO, Gulf and Valero.

With this acquisition, Global Partners will become the largest distributor for several of these fuel brands, Slifka said.

"This is a business we know well, located in regions that are very familiar to us, and effectively in our backyard," he said.

In 2010, Global Partners acquired a water-borne terminal portfolio from Warren Equities in Newburg, N.Y. "That transaction served as an important building block in helping us establish a strong base of terminaling assets in the New York market," said Slifka. "We've had our eye on Warren for a number of years, and we're excited about the opportunity to acquire a complementary company with such a strong brand presence."

Strategically, the Xtra Mart convenience stores and gas stations "fit nicely within our existing footprint in the Northeast. We're positioned to capitalize on unique operating synergies by virtue of the fact that we have terminal assets and wholesale supply situated around these locations. The acquisition not only creates meaningful economies of scale, but it is also a platform for multiple avenues of growth," he said.

Many of the commissioned agent sites are high-volume locations in attractive retail markets, said Slifka. "These include a concentration of sites in the densely populated northern Virginia and Maryland region, an area in which we look forward to future expansion."

He added, "One of the things we bring to the table is a strategic expertise in retail marketing, beginning with the 2010 acquisition of stations and supply rights from ExxonMobil and later with the purchase of Alliance Energy. As with these transactions, Warren Equities strengthens the purchasing power of our convenience store operations. … We looked at their [agreements] to supply their convenience stores. We have savings from our existing suppliers--we have to work with existing contracts that they have in place, but we're hopeful that we'll be able to squeeze some synergies out of that. And the same goes for gasoline supply. We think there's some low-hanging fruit there we're going to attack right away."

"This transaction is the right strategic step for our company," said Warren Equities chairman Herb Kaplan. "Global's acquisition will enable Warren to become part of an established, growing and financially strong master limited partnership that is recognized as a leader in fuel distribution and retail asset development."

Raymond James was financial advisor to Global Partners in this transaction.

A publicly traded master limited partnership (MLP), Waltham, Mass.-based Global Partners LP is a midstream logistics and marketing company. Global owns, controls or has access to one of the largest terminal networks of refined petroleum products and renewable fuels in the Northeast, and is one of the largest distributors of gasoline, distillates, residual oil and renewable fuels to wholesalers, retailers and commercial customers in New England and New York. Global is a leader in the purchasing, selling and logistics of transporting domestic and Canadian crude oil and other products by rail across its "virtual pipeline" from the mid-continent region of the United States and Canada to the East Coast and West Coast for distribution to refiners and other customers. With a portfolio of approximately 900 locations primarily in the Northeast, Global also is one of the largest independent owners, suppliers and operators of gas stations and convenience stores.

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