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Mergers & Acquisitions

More U.S. Growth for Applegreen

Irish retailer acquires stake in 23 highway service plazas in Connecticut
Photograph courtesy of Applegreen

DUBLIN — Supporting its objective to expand its U.S. presence, Irish convenience-store chain Applegreen has acquired a 40% stake in CT Service Plazas, consisting of 23 on-highway facilities in Connecticut, for approximately $37.6 million.

The Dublin-based company has entered into a consortium shareholder agreement with IST3 Investment Foundation, Zurich, Switzerland, and TD Greystone Asset Management, Regina, Saskatchewan. The consortium has entered into a securities purchase agreement to acquire JLIF Holdings (Project Service) U.S. Inc and its wholly owned subsidiary Project Services LLC, which operates the Connecticut Service Plazas. IST3 and TD Greystone will hold 40% and 20% stakes, respectively.

“This transaction represents a rare opportunity to acquire a high-profile service plaza concession project in one of our core regions in the United States, significantly increasing our market presence in the Northeast and positioning the company for further growth in this key strategic market,” said Applegreen Chief Executive Bob Etchingham.

*Applegreen is No. 96 in CSP’s 2019 Top 202 ranking of U.S. convenience-store companies by umber of retail outlets.

Applegreen entered the U.S. market in 2014, expanded its small foothold in 2016 and in 2017 acquired The Brandi Group, which operated the 42-unit Pitt Stop convenience-store chain based in Columbia, S.C. In June 2019, it acquired a leasehold interest in 46 c-stores in the Minneapolis and St. Paul area from Allentown, Pa.-based CrossAmerica Partners LP in Michigan, Minnesota and Wisconsin.

Applegreen is acquiring a significant equity stake in a well-established and fully redeveloped service plaza business, located on three heavily trafficked interstate routes between New York and Boston. The 23 service plazas benefit from exclusive rights along the I-95, I-395 and Route 15 highways in Connecticut, granted under a long-term concession agreement with the Connecticut Department of Transportation.

Applegreen has entered into a call option agreement with TD Greystone, exercisable at five years after completion of the transaction, which will enable it to increase its interest in CT Service Plazas to 60% and take majority control, if it exercises the option.

The acquisition is subject to approval from the Connecticut Department of Transportation, which Applegreen expects to be completed in third-quarter 2019.

CT Service Plazas consists of 23 on-highway service plazas. Project Services has the exclusive rights along the routes in Connecticut under a concession agreement with the Connecticut Department of Transport, which has 25 years remaining, with the potential to extend it for an additional 10 years. The plazas offer services including fuel, quick-service food and beverage, retail, restroom and other facilities, operating 24 hours a day and seven days a week. Approximately 91% of revenue generated by CT Service Plazas is from long-term anchor tenants including McDonalds, Dunkin' Donuts, Subway and Waltham, Mass.-based Global Partners LP’s Alliance Energy.

The deal presents Applegreen with an opportunity to access motorway service areas in the United States, offering locations with a high barrier to entry for competitors. CT Service Plazas is a well-established operator with a track record of generating “robust and consistent cashflows with high-traffic volumes and strong margins,” the company said. The sites provide the opportunity to generate very stable long-term earnings with revenue mainly from long-term contracted, well-established, multinational branded anchor tenants, it said.

The transaction opens up new and “strategically valuable” relationships with a variety of high-profile, large-scale quick-service restaurant brands and increases Applegreen’s exposure to nontraditional fuel earnings with growth opportunities across retail, advertising, food and beverage and electric-vehicle (EV) charging solutions, it said. The company said it has identified a number of potential opportunities to drive additional growth across the plazas, including adding new tenants, catering facilities and EV charging bays.

Applegreen will support the existing management team of CT Service Plazas from its existing Petrogas Group U.S. Inc. Northeast regional office in Plainview, N.Y., and assist management to implement operational improvements and revenue growth initiatives.

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