Mergers & Acquisitions

Insider's View: Q1 2015 M&A Review

Big names making big deals as momentum picks up steam

SCOTTSDALE, Ariz. -- The first quarter of 2015 picked up where things left off in 2014 in terms of merger and acquisition activity in the convenience-store industry. Following on the heels of some very large transactions that either closed or were announced during the fourth quarter of 2014, the momentum seems to be continuing, and, if anything, picking up steam.

c-store merger & acquisition roundup

The acquisition of The Pantry Inc. by Alimentation Couche-Tard/Circle K closed during the first quarter, and a number of significant transactions were announced during the quarter, as well.  Furthermore, the appetite for acquisitions from the master limited partnerships (MLPs) and the major industry players seems to be growing by the quarter.

Many of the major industry participants are looking at a number of deals, and others, such as Wawa, are expanding through explosive organic growth. If the first-quarter activity is any indication of what is to follow in next nine months, 2015 should prove to be a very active year.

Alimentation Couche-Tard/Circle K

The first quarter of 2015 was certainly a busy one for Alimentation Couche-Tard/Circle K.

On March 16, Couche-Tard completed its merger with The Pantry Inc. The all-cash transaction, in the amount of $860 million, represented a per-share price of $36.75, with a total enterprise value of approximately $1.7 billion including debt. The transaction purchase price represented a 27% premium to The Pantry’s closing share price on Dec. 16, 2014. Post-merger, the combined U.S. and Canadian store count is more than 7,800.

Couche-Tard also announced that it acquired 21 Tiger Tote Food Stores, as well as 151 dealer fuel supply agreements in Texas, Mississippi and Louisiana from Cinco J Inc., dba Johnson Oil Co. of Gonzales, Texas. It is anticipated that all of the acquired stores will be converted to the Circle K brand.

CST Brands Inc./CrossAmerica Partners LP

CrossAmerica Partners LP closed on the purchase of all of the outstanding shares of Hudson, Wis.-based Erickson Oil Products Inc. and certain related assets for $85 million, subject to certain post-closing adjustments. Erickson operates 64 convenience stores in Minnesota, Michigan, Wisconsin and South Dakota, with a concentration in the Twin Cities. CrossAmerica intends to operate the Freedom Valu convenience stores, but expects to transfer the operation of certain sites over time to CST Brands Inc., the parent company of CrossAmerica’s general partner.

In late March, Joe Topper, chief executive officer and president of CrossAmerica Partners, announced his plans to retire as CEO effective Sept. 30, 2015, and resigned as president effective immediately. The new president, Jeremy Bergeron, who currently serves as senior vice president of integration and development for CST Brands, comes with nearly 20 years of experience with Valero and CST Brands. Topper will continue to serve on the boards of both CST Brands and CrossAmerica after he formally steps down as CEO.

In speaking with an industry analyst recently, senior management of CST Brands and CrossAmerica stated that they are currently looking at 20 deals in their acquisition pipeline and are targeting $150 million to $200 million in acquisitions a year, subject to market conditions. CST is also focused on organic growth, and plans to build 35 to 40 new locations in the United States this year, as well as 10 to 12 new locations in Canada.

Speedway LLC

Speedway LLC is making steady progress on rebranding the 1,245 gas stations and convenience stores that were included in the October 2014 acquisition of Hess’ retail portfolio.  Speedway has already rebranded 134 sites since the date of the acquisition. The Hess sites are spread across 16 states on the East Coast and in the Southeast. Under the terms of the deal, Speedway has three years to rebrand the sites and is investing $410 million between 2014 and 2017 in the process.

Other Notable M&A Transactions

  • Global Partners LP completed the acquisition of independent petroleum marketer Warren Equities Inc. from The Warren Alpert Foundation. The acquisition includes 147 company-operated Xtra Mart convenience stores and related fuel operations, 53 commission agent locations and fuel-supply agreements for approximately 320 dealers.  The properties are located in 10 states in the Northeast and mid-Atlantic. The purchase price, subject to post-closing adjustments, was approximately $387 million, including working capital.  The partnership expects the acquisition to be accretive in the first full year of operations and to generate EBITDA of $50 million to $60 million in the second full year of operations.
  • GPM Investments LLC entered into an agreement with Sun Capital Partners Inc. to purchase the Midwestern division of VPS Convenience Store Group LLC, which consists of 163 company-operated stores in Indiana, Ohio, Michigan and Illinois operating under the Village Pantry and Next Door Store brands. This transaction adds to GPM’s acquisition of the Southeast operations of VPS in August 2013, which included 263 convenience stores under a variety of names.  Those stores are now a division of the company called GPM Southeast and are located in North Carolina, South Carolina, Tennessee and Virginia. In addition, GPM took ownership of 42 convenience stores in Illinois, Iowa and Kentucky from Road Ranger LLC.
  • Empire Petroleum Partners LLC and Atlas Oil Co. combined their retail dealer businesses to create a national fuel distributor in a 29-state network servicing 1,350 accounts and distributing nearly 1 billion gallons of fuel annually. As part of the merger, Sam Simon, chairman and CEO of Atlas Oil, will retain a significant ownership stake in Empire Petroleum and will join its board of directors in an influential role.
  • Mid-Atlantic Petroleum Properties LLC (MAPP) sold certain assets to Petroleum Marketing Group Inc. and its affiliates.  The deal included all of MAPP’s 37 gasoline stations and convenience stores located in Washington, D.C., and Maryland.
  • Western Refining Inc. announced that it is acquiring 31 convenience stores in southern Arizona from Reay’s Ranch Investors LLC.  The stores will be rebranded under Western Refining’s Giant brand.
  • TravelCenters of America LLC, operator of TA and Petro Shopping Centers travel centers and Minit Mart convenience stores, announced that it has acquired a total of 26 gasoline stations and convenience stores (20 in Minnesota and six in Kentucky) in two unrelated transactions.  Six stores in western Kentucky were sold to TravelCenters by Golightly & Long LLC, dba Cheers Food & Fuel, and 20 stores in Minnesota were sold by Best Oil Co. of Cloquet, Minn.

CONTINUED: Notable Industry Growth Initiatives

Growth Initiatives

  • Wawa Inc. continued its aggressive growth in Florida. The Pennsylvania-based company already has 60 locations in the state, primarily in central Florida, and announced plans for expanding into Broward and Palm Beach Counties in South Florida during the next five years. By the end of 2019, Wawa wants to have about 20 stores open in each of Palm Beach and Broward Counties. The company also plans to expand into Miami-Dade by 2017 or 2018. Wawa expects to open its 100th Florida store in 2016, four years after building its first store in Orlando. Wawa also announced a massive remodeling program intended to remodel its older legacy stores in order to reflect the company’s latest design, technology and foodservice offering. Wawa will remodel 40 existing stores in 2015, the most in one year in the chain’s more than 50-year history.
  • Sheetz Inc., which operates in six states in the East, opened its 500th store on Feb. 24 in Thomasville, N.C. The company is planning more than 30 new store openings in 2015.

Divestiture of Non-strategic Assets

  • Fresh & Easy announced that it was closing and selling approximately 50 stores in California, Arizona and Nevada in the coming months as the grocery chain prepares to pursue a new fresh-food convenience-store concept. Two of the stores are in Las Vegas, five are in Arizona, 13 are in northern California, and 30 are in southern California. The company was bought out of bankruptcy in 2013 by Los Angeles-based The Yucaipa Cos.
  • Mutual Oil Co. Inc. sold its branded, contract dealer business, consisting of more than 150 dealer supply contracts, structured agreements and its transportation fleet of 22 transports to an undisclosed purchaser.


It seems likely that the pace of merger and acquisition activity in the convenience-store industry will increase, resulting in a further concentration of stores in the hands of a few major industry players.

Many current c-store owners of midsize chains who have been attempting to grow through strategic acquisitions have been consistently frustrated by the high multiples that many of the MLPs and other large companies have been willing to pay. This factor, coupled with the current favorable interest rate environment, has caused many operators who have never considered selling their company, to do just that.

From a personal perspective, we have been surprised at the number of operators who are exploring their strategic alternatives at the present time. Whether these operators decide to move forward with a sale of their companies remains to be seen, but it certainly seems prudent for owners to evaluate their options based on the current climate for mergers and acquisitions.

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