Mergers & Acquisitions

Insider’s View: 2014 M&A Review Pt. 1

A look back at a year of shocking and surprising c-store deals

SCOTTSDALE, Ariz. -- The year 2014 will be remembered as one of blockbuster deals by master limited partnerships (MLPs). Of the four very large convenience–store transactions that were completed or announced during the year, the purchasers in three of them were existing or acquired MLPs.

convenience store mergers and acquisitions

Speedway LLC/Hess Corp.

In May, Hess Corp. surprised the industry by announcing it would sell its entire retail network and transport operations to Marathon Petroleum Corp.’s Speedway LLC subsidiary for $2.82 billion, which represented an EBITDA multiple in the low to mid-teens, according to industry analysts. Hess is the largest operator of c-stores along the East Coast and the fifth largest in the United States by number of company-operated sites, with 1,256 stores in 16 states. The transaction brought the combined number of Speedway company-owned stores to 2,733, which puts the company close to the top by number of locations. Speedway said it will rebrand all Hess locations within three years.

Energy Transfer Partners LP/Susser Holdings Corp.

To the shock of everyone in the industry, Energy Transfer Partners LP (ETP), parent company of Sunoco Inc., announced during the second quarter the purchase of Susser Holdings Corp. (SHC) and its 630-store chain based in Corpus Christi, Texas, for a total consideration of $1.8 billion. According to industry insiders, this purchase price represented an EBITDA multiple of 11x to 13x.

Following the initial purchase of SHC, a series of drop-down transactions will occur whereby existing ETP and SHC retail business units will be sold to Susser Petroleum Partners LP. This process will result in the combination of ETP’s fuel brand and Susser’s Stripes convenience stores. The merger transaction was completed in late August.

ETP also announced the acquisition of 40 Tigermarket convenience stores in Tennessee from Tiger Management.

In late September, an ETP affiliate signed an agreement to acquire Honolulu-based Aloha Petroleum Ltd., Hawaii’s largest independent gasoline marketer and one of the largest c-store operators on the islands, for about $240 million. Aloha markets in approximately 100 stores throughout the state, about half of which are company-operated.

In October, Susser Petroleum Partners LP officially changed its name to Sunoco LP. ETP has announced that it intends to continue its aggressive growth campaign in 2015.

CST Brands Inc./CrossAmerica Partners LP

It was certainly a busy year for CST Brands Inc. in terms of merger-and-acquisition activity. Having been spun off from Valero Energy Corp. in 2013, the company wasted no time in pursuing its strategic initiatives.

Early in the year, CST Brands retained NRC Realty & Capital Advisors, Chicago, to divest approximately 100 stores in nine states. At the same time, the company said it planned to build 30 new stores in the United States and eight in Canada during the year. Later in 2014, CST Brands surprised industry observers by announcing that it was acquiring the general partner of Lehigh Gas Partners (LGP), along with its incentive distribution rights, for $17 million in cash and 2.044 million shares of CST Brands common stock. That transaction closed in October, and LGP changed its name to CrossAmerica Partners LP.

Shortly after, CST Brands entered into an agreement to purchase the assets of Canastota, N.Y.-based Nice N Easy Grocery Shoppes Inc. (NNE), consisting of 33 company-operated c-stores and the franchisor rights for 44 locations in central New York. NRC Realty & Capital Advisors served as financial advisor to NNE in connection with the sale, which closed in early November.

In December, CrossAmerica Partners announced that it entered into an agreement to purchase all of the outstanding shares of Erickson Oil Products Inc. and certain related assets for $85 million. Erickson Oil, based in Hudson, Wis., operates 64 convenience stores in Minnesota, Michigan, Wisconsin and South Dakota, with a concentration in the Minneapolis/St. Paul region.  The stores operate primarily under Erickson Oil’s proprietary store brand, Freedom Valu. CrossAmerica Partners initially intends to operate the stores, but expects to transfer the operation of certain sites over time to CST Brands. The transaction is expected to close in the first quarter of this year.

CONTINUED: Xtra Mart, Couche-Tard & 7-Eleven

Global Partners LP/Warren Equities Inc.

In October, Global Partners LP, through its Global Montello Group Corp. subsidiary, announced it would purchase 100% of the equity interest in petroleum marketer and Xtra Mart c-store operator Warren Equities Inc. for about $383 million. Warren Equities sells approximately 500 million gallons of fuel annually through 520 retail locations in 10 states in the Northeast. Based in Providence, R.I., the company operates 147 Xtra Mart stores, markets fuel through 53 commissioned-agent locations and supplies fuel to 320 dealers. As a result of this transaction, Global Partners’ portfolio of company-operated sites, commissioned agents, dealer contracts and gas stations will increase by 50% to more than 1,500 locations. The transaction is expected to close in the first quarter of 2015.

Alimentation Couche-Tard/Circle K

During the third quarter, Alimentation Couche-Tard Inc. agreed to acquire all 55 Super Pantry c-stores from Champaign, Ill.-based Tri Star Marketing Inc. The stores, located in Illinois and Indiana, will operate under the Circle K brand. The company also announced that it expects to construct or rebuild 80 to 100 stores in its current fiscal year, a significant increase over the previous year.

In December, Couche-Tard shocked the industry by announcing that it had entered into a merger agreement to acquire The Pantry Inc. in a transaction valued at $1.7 billion including debt, or $36.75 per share. The transaction price represents a premium of 27% to The Pantry’s closing share price on Dec. 16, 2014. The Pantry currently operates approximately 1,500 owned and leased convenience stores, most under the Kangaroo Express brand, located throughout the Southeastern and Gulf Coast regions of the United States. The transaction is expected to close in the first half of this year.

7-Eleven Inc.

7-Eleven Inc., Dallas, was relatively quiet during 2014 in terms of acquisitions, but it was extremely active in the divestiture of non-strategic stores. In the first quarter, 7-Eleven announced the sale of 72 stores in eight states; in the second quarter, the company sold another 75 stores in 16 states. 7-Eleven engaged NRC Realty & Capital Advisors to handle both sales.

In part 2 of this story, we look at some of the smaller, but no-less volatile M&A transactions of 2014.

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