Mergers & Acquisitions

Special Report: Gulf Oil’s New Future, Part 1

Back under Petrowski’s guidance, brand gets opportunity to explore its potential

BOSTON – It was no surprise when Joe Petrowski’s name showed up when Cumberland Farmssold the venerable Gulf brand last year.

The Cumberland Gulf Group

Gulf and its people have always held a special place in Petrowski’s heart. As former CEO of Gulf Oil and later The Cumberland Gulf Group, he invested eight years in a brand, whose New England roots hearken back to the early 1900s and had passed down through several owners.

During Petrowski’s first tenure, he helped spread the Gulf brand to 3,500 sites and grew the Cumberland Farms c-store network to 700 stores.

In Part 2: What does the Gulf Oil deal mean to the convenience-store industry?

In 2013, Petrowski left Cumberland Gulf and founded Mercantor Partners, an energy investment company based in Framingham, Mass., right in the retailer’s hometown. Mercantor would later team up with Boston-based private-equity firm ArcLight Capital Partners to take on downstream energy acquisitions.

Last spring, Petrowski turned the team’s attention to one especially attractive, potential buy: Gulf Oil.

“As CEO of the combined group I strongly believed that trying to run two distinct different businesses in two completely different industries from a capital, culture [and] skills standpoint was challenging, so CFI may want to divest Gulf,” Petrowski told CSP Daily News. “ArcLight was very interested in acquiring a platform [company] with a strong management team; I was simply the facilitator.”

Petrowski was right--CFI was ready. Ari Haseotes, CEO of CFI, which today operates 560 stores in eight states stretching from Maine to Florida, declined to comment for this story. But according to Ron Sabia, chief strategy officer for Gulf Oil LP and its former president and COO, the need to raise more capital to grow both businesses was a key driver for the sale.

“The retail side of the business is heavily investing in new sites, upgrades of existing sites, and there really wasn’t enough capital to go around for both Gulf and Cumberland,” Sabia told CSP Daily News. Since Petrowski’s departure, Cumberland has invested heavily on the c-store network, breaking into new urban locations, launching a robust fresh foodservice program, growing a loyalty program that maximizes forecourt and backcourt transactions, developing a new store prototype and intensifying a push into Florida. Gulf Oil, meanwhile, was re-entering former markets in Ohio and Kentucky among others—and expanding its loyalty program.

“Gulf, with very little capital invested, did a tremendous job organically growing the company,” Sabia said. “To get the most out of the company, it needed to get some capital that was in limited supply amongst both companies to do what we want to do.” There was also a desire within the Haseotes family, said Sabia, to create more liquidity for Cumberland shareholders.

The bidding process was “pretty robust,” said Sabia, with eight to nine potential buyers ultimately presenting to CFI’s board. While he was not privy to all of the board’s deliberations, Sabia said CFI chose ArcLight based on two factors: size of the bid, which is undisclosed, and ArcLight’s ability to keep on most Gulf Oil employees.

After papers were signed in May, the ArcLight team spent July through the end of September negotiating with the Federal Trade Commission (FTC) over the number of terminals it would ultimately have, to satisfy anticompetitive charges filed in a consent order by the FTC and the attorney general of Pennsylvania. The final agreement requires ArcLight to divest four terminals, which Gulf Oil execs say, should happen before Jan. 28, the day after the FTC decides whether to make its consent order final.

Jerry Ashcroft, an executive with midstream credentials at Buckeye, Colonial Pipeline and JP Energy Partners, was named president and CEO of the new Gulf Oil LP. His team’s first order of business: business as usual. “For our customers, we want this to be seamless transition,” Ashcroft told CSP Daily News. “We want them to be able to continue to receive the safe, reliable service that they have been receiving.”

Gulf employees, he noted, will be focusing on four key areas: safety, operational excellence, growth and customer service.

As chairman of Gulf Oil LP, Petrowski’s role will be to support Gulf’s executive management team. He expects to share his expertise on forming a long-term strategy, risk oversight and commodity trading, training the next generation of professionals, working with key customers and counter parties, and leveraging his connections built up over 30 years in the industry.

“If you know Joe, he has a huge engine, and he is willing to help us on tactics and strategy,” said Ashcroft, adding that Sabia and Gulf Oil’s management team will be running the day-to-day business.

“As my friend Jim Haslam Sr. of Pilot used to say,” said Petrowski, referring to the founder of the travel stop chain Pilot Corp. (now Pilot Flying J), “my talent is getting up every day and resisting the temptation to screw up the work of my exceptional people.”

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