Mergers & Acquisitions

New MLP to Emerge Through GPM IPO

New entity will supply fuel to more than 500 c-stores; proceeds will pay for Road Ranger

RICHMOND, Va. -- GPM Petroleum LP, which distributes motor fuel to GPM Investments' convenience stores, will be the next master limited partnership (MLP) in the industry pending review of an initial public offering (IPO) filing with the U.S. Securities & Exchange Commission (SEC).

GPM Investments GPM Petroleum MLP IPO (CSP Daily News / Convenience Stores / Gas Stations)

The SEC has 30 days to review the filing, in which GPM Petroleum, a spinoff from GPM Investments, is seeking an estimated $100 million from the stock sale.

As reported in a 21st Century Smoke/CSP Daily News Flash, the company is applying for a listing of its common units on the NYSE under the symbol “GPMP.”

GPM will use the net proceeds from this offering to repay borrowings that financed the acquisition in December 2014 of 43 Road Ranger convenience stores, and for general partnership purposes, including working capital or pre-funding capital expenditures.

GPM Petroleum's agreements with GPM Investments include:

  • A fuel distribution agreement, pursuant to which it will distribute the substantial majority of motor fuel purchased by GPM for sale to its existing convenience stores (other than convenience stores for which it is the distributor of motor fuel under the GPM RR Distribution Contract, a 10-year wholesale motor fuel distribution agreement substantially similar to the GPM Distribution Contract, pursuant to which it will distribute motor fuel to convenience stores acquired by GPM in the Road Ranger acquisition at cost plus a fixed fee of 4.5 cents per gallon for a period of 10 years), independent and lessee dealers and consignment locations at cost, plus a fixed fee of 4.5 cents per gallon for a period of 10 years, in addition to future volumes added pursuant to the terms of the omnibus agreement, referred to as the GPM Distribution Contract.
  • The omnibus agreement, pursuant to which, among other things, it will receive a 10-year right of first offer to purchase the right to distribute fuel to GPM Investments for newly acquired convenience stores at a negotiated rate; and a 10-year right to participate in acquisitions with GPM.

GPM Petroleum said it anticipates expanding "by either purchasing the right to provide wholesale motor fuel to convenience stores that may be acquired by GPM or jointly consummating acquisitions with GPM, as well as by directly acquiring wholesale motor fuel businesses with existing dealer operations. Through GPM’s expansion, we plan to further develop our wholesale motor fuel distribution both within our existing area of operations and in new geographic areas."

It added, "GPM has considerable opportunity to serve as a consolidator in [the c-store] industry. … As GPM continues to make acquisitions, we will have the right, under the right of first offer contained in the omnibus agreement, to purchase distribution rights to any new locations GPM acquires."

Many MLPs in the energy sector derive income from the wholesale distribution of refined products to convenience stores. They may also own real estate and collect rent; however, income from c-store retail operations, including the sale of fuel to consumers, is not qualified MLP income under the tax code.

GPM is in a quiet period and cannot comment on the deal, a company spokesperson told CSP Daily News.

Raymond James & Associates, St. Petersburg, Fla., is the financial lead for GPM in the IPO filing.

As of April 15, 2015, Richmond, Va.-based GPM Investments controlled more than 500 convenience stores under various brand names including Fas Mart and Shore Stop that sell motor fuel, merchandise, food, beverages and other products and services to retail customers in the Mid-Atlantic, Southeastern, Midwestern and Northeastern United States.

GPM Investments distributed volumes it purchased from GPM Petroleum to more than 500 convenience stores controlled by GPM, more than 35 sites operated by independent dealers, more than 20 sites owned or leased by GPM and operated by lessee dealers and more than 40 consignment locations where GPM sells motor fuel to retail customers.

Along with Fas Mart and Shore Stop, GPM convenience store brands include Scotchman Stores, Young's, Li'l Cricket, BreadBox and One Stop.

Upon the completion of this offering, GPM Investments will purchase the majority of its motor fuel from GPM Petroleum. For the year ended Dec. 31, 2014, on a pro forma basis, GPM Petroleum distributed 461.7 million gallons of motor fuel to GPM-controlled convenience stores and 68.7 million gallons of motor fuel to third-party customers. Its wholesale motor fuels distribution now spans 13 states: Connecticut, Delaware, Illinois, Iowa, Kentucky, Maryland, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee and Virginia.

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