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Mergers & Acquisitions

No M&A-December Romance

But slew of year-end deals makes month a memorable one for c-store acquisitions

OAKBROOK TERRACE, Ill. -- This is shaping up as the "December to remember." December mergers acquisitions M&A (CSP Daily News / Convenience Stores / Gas Stations)

In the convenience store channel, two important mid-tier deals have been announced and the industry is still buzzing about last week's blockbuster sale of southeastern c-store giant The Pantry to Alimentation Couche-Tard.

Among the most active players in the market is CST Brands, the publicly traded spinoff of Valero.

"We've been pretty busy here with CrossAmerica in the last 45 days with three announced deals for Nice N Easy [in New York], Erickson Oil in Minnesota and 22 San Antonio/Austin Shell-branded stores from Timewise," CST CEO Kim Lubel told CSP Daily News. "So no one is sitting still either at the Pantry or CST."

Unlike a couple of years ago when the onset of an increase in capital gains spurred end-of-year activity, financial experts say there is no single driver sparking the recent spate of activity other than the tidal wave of new money in the convenience channel.

"There is nothing magical about closing a deal in December," said Roger Woodman, managing director of Raymond James Investment Banking, St. Petersburg, Fla. "A number of the recently announced deals were signed, but will not necessarily close until the beginning of 2015. In most cases, private-company sellers would rather sell or close in January versus December in order to defer the payment of taxes which would be due in April."

December 2012 was a notable exception, Woodman acknowledged. "We did see a heightened level of sale transactions in December 2012, which was right before the increases in cap gains and income taxes took effect. I believe the flurry of activity [today] reflects prospective buyers' desire to take advantage of strong valuations and strong buyer demand before the market window closes or valuations begin to trend downward."

New Players

The wave of master limited partnerships (MLPs) in the convenience store sector, coupled with the handful of publicly traded concerns, has heightened the importance of quarterly returns versus traditional year-over-year activity.

"As it relates to public companies, they tend to live quarter to quarter because they are under such scrutiny by analysts and shareholders, especially any activist investors," said Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, Chicago.

"Everyone wants to see tangible results, and the quarterly investor calls that each public company conducts presents an opportunity for companies to showcase their accomplishments during the quarter. Furthermore, everyone wants to get deals completed by the end of the calendar year," he said.

Ken Shriber agreed. "It's more coincidental that so many deals are happening in December," said the managing director of Petroleum Equity Group, Chappaqua, N.Y. "But when possible, some companies want to start and have full ratability for the entire next year."

Will there be any more deals between now and December 31?

Ruben sure thinks so. "There are several deals that are currently 'on the street,' and there may very well be some announcements before the end of the year."

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