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Mergers & Acquisitions

Insider’s View: 2014 M&A Review Pt. 2

Smaller deals show promise for an even more volatile 2015

SCOTTSDALE, Ariz. -- While big-name deals that included Couche-Tard, The Pantry, Speedway, Hess, CST Brands and Susser Holdings stole the merger-and-acquisition headlines in 2014, there were numerous smaller, but no-less notable transactions throughout the year. c-store mergers and acqusitions

Here’s a look back.

  • Fortress Investment Group, a New York-based investment management firm, acquired United Oil Co., consisting of about 130 sites in the Los Angeles and San Diego metropolitan markets, including 40 kiosk-style locations. United is also a distributor of Shell, ConocoPhillips/76 and Valero brand fuel in Southern California and delivers fuel to approximately 100 dealer sites. Although the purchase price was not disclosed, it was rumored to have been in the range of $450 million to $500 million.
  • Par Petroleum Corp., the parent company of Hawaii Independent Energy LLC, agreed to acquire Koko’oha Investments Inc., the parent company of Mid Pac Petroleum LLC, for $107 million. The acquisition involved 80 gasoline stations and c-stores under the 76 fuel brand.
  • Empire Petroleum Partners LLC was extremely active in the acquisitions arena in 2014. Early in the year, it acquired 83 wholesale distribution contracts from King Fuels Inc., a fuel distributor in the Houston market. Empire also acquired 59 fuel-supply agreements and real-estate and leasehold assets in the Atlanta market from Georgia Oil Holdings. In the third quarter, Empire acquired the retail dealer business of Mansfield Oil Co. of Gainesville Inc. and merged it into Empire. The combination of Empire and Mansfield will create a national dealer-focused fuel distributor that services more than 1,100 accounts in 26 states. Most recently, Empire announced the pickup of 11 former Corner Store c-stores in the Lubbock, Texas, market from CST Brands Inc.
  • Atlas Oil Co. sold all of its BP-branded assets in Chicago and northwest Indiana to Lehigh Gas Partners LP. Lehigh purchased 55 wholesale supply contracts, 11 fee-and-leasehold sites, two commission marketing contracts and other assets for $38.5 million. In the third quarter, Atlas announced the acquisition of the portfolio of Dennis Trigg in the greater Houston area, consisting of 80 fuel customers with a fuel consumption of 50 million gallons per year.
  • Casey’s General Stores Inc. acquired 24 Stop-n-Go locations in North Dakota and Minnesota and said it intends to rebrand the stores as soon as possible. Casey’s also announced that during its current fiscal year, it has built 44 new convenience stores and has completed 20 replacements and 25 major remodels.
  • Lehigh Gas Partners LP acquired Petroleum Marketers Inc. based in Roanoke, Va., for $61 million. The acquisition consisted of 85 c-stores and nine co-branded c-stores/QSRs in Virginia.
  • Petroleum Marketing Group Inc. (PMG) closed on the acquisition of 27 c-stores owned by Cumberland Farms Inc. in New Jersey, Delaware and Pennsylvania. PMG also closed on the acquisition of 13 c-stores and a large number of fuel supply contracts formerly owned and controlled by Ocean Petroleum. The sites and accounts are located on the East Coast from northern New Jersey to Virginia.
  • Junonia Capital LLC, through its affiliate Town Star Holding LLC of Fort Myers, Fla., entered the c-store industry for the first time by purchasing 13 c-stores and three QSRs in Florida from TimeSaver Food Stores Co. of Port St. Lucie, Fla. NRC Realty & Capital Advisors served as financial adviser to Junonia in connection with the transaction and arranged sale-leaseback financing for the acquisition.
  • GPM Investments LLC, the Israeli-owned operator of approximately 600 convenience stores across 10 states, ended the year by announcing two acquisitions.  GPM agreed to acquire 43 convenience stores and a Subway location from Road Ranger LLC, based in Rockford, Ill. This transaction, which is expected to close in the first quarter of this year, expands GPM’s footprint in the Midwest. In addition, a GPM affiliate entered into an agreement to acquire eight One Stop Food Store convenience stores located in North and South Carolina from Arey Oil Co.

Conclusion

So what are the lessons to be learned from 2014?

Consolidation of the industry will continue and probably accelerate in 2015 and the years ahead. The combination of historic low interest rates coupled with the tax advantages realized by the MLPs (master limited partnerships) should fuel continued consolidation and will probably make it more difficult for non-MLPs to compete effectively for quality companies and portfolios of assets as they become available.

Further, based on conversations we have had with industry operators, it is clear many companies that have never seriously considered selling their businesses are giving it a harder look now, especially in light of some of the “sky-high” multiples that have been paid for many recent acquisitions.

A review of the transactions in 2014 makes it clear that not every transaction will command a high multiple or a significant premium. However, companies that are well run, have good assets in prime areas of the country and provide synergies for potential purchasers will be very attractive candidates for acquisitions by the major players in the industry.

We believe that 2015 could surpass 2014 in terms of acquisitions, and that multiples for top-of-class assets will remain in the high single digits and double digits. It will be an exciting year.

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