MPC president and CEO Gary Heminger has long maintained that the company continues to value an integrated supply chain. But pressure from New York-based activist shareholder Elliott Management Corp. may have been the factor that drove the decision to conduct the review.
Despite being downplayed by management, a “tax-free separation” of the retail network is one of the alternatives that the board’s special committee will contemplate, the Findlay, Ohio-based company said. It expects to provide an update on the review by mid-2017.
That possibility begs the question: Who could buy Speedway?
The obvious buyer—l’elephant dans la piece, le gorille de 400 kg—is acquisition juggernaut Alimentation Couche-Tard Inc., the Laval, Quebec-based owner of the global Circle K convenience-store network.
Michael Van Aelst, analyst with TD Securities Inc., Toronto, said in a research note that Couche-Tard was a bidder for the Hess retail network in 2014.
MPC closed on the acquisition of the approximately 1,250 convenience stores of Hess Corp. in late September 2014, practically doubling the size of its nearly 1,500-store Speedway retail network upon rebranding.
“We are convinced that Couche-Tard would be involved should an auction be initiated,” he said. “We do not believe that its interest level has waned.”
He estimates Speedway’s value to be between $9 billion and $10 billion.
Keith Howlett, analyst with Desjardins Capital Markets, Montreal, agrees with this valuation. And in a separate research note, he said “by early [calendar year 2018], Couche-Tard may be facing a new public competitor (Speedway) with an enterprise value of more than $10 billion, or alternatively, may be invited by Marathon to bid on acquiring Speedway.”
Another major contender, of course, could be 7-Eleven Inc., Irving, Texas.
7-Eleven’s Tokyo-based parent company Seven & i Holdings Co. Ltd. (SEI) said late last year that it plans to increase its store count in North America to 10,000 by fiscal 2019. It has approximately 8,900 c-stores in the United States and Canada.
A previously announced plan for long-term domestic expansion had called for up to as many as 20,000 stores within several years. And in 2013, Seven & i said it intended to double its number of convenience stores in North America via acquisition.
Seven & i Holdings Co Ltd. reportedly bid on CST Brands Inc. in 2016, losing to Couche-Tard. The two companies are competing for the prize of having the most convenience stores in the United States, with 7-Eleven at more than 8,300 and Couche-Tard at more than 7,200.
- 7-Eleven, Couche-Tard and Speedway are part of CSP's Top 202 list of the largest chains in the c-store industry. Watch for the unveiling of the list next week on CSP Daily News.
A Speedway acquisition would cement 7-Eleven’s lead or put Couche-Tard over the top.
The contest for Speedway “likely would be a cage fight of the titans, 7-Eleven and Circle K,” Ken Shriber, managing director and CEO of Petroleum Equity Group, Chappaqua, N.Y., told CSP Daily News.
But Shriber also offers a contrarian view to the idea that Marathon will, in fact, spin off Speedway.
“It will be interesting to see how this plays out, but I think that considering a spinoff this soon after the [Hess retail] acquisition may be premature as they just completed one full year of operations, and really less, as it took more than six months to rebrand all the sites. Speedway has not had the opportunity to deliver the upside post Hess with their improved c-store and foodservice programs,” he said.
“The price that Marathon paid to Hess, approximately $3 billion when you include rebranding and new brand advertising to East Coast geographies unfamiliar with the Speedway name, was a large premium to market,” said Shriber. “The way that such a price paid is supported economically is through integrating the P&L [profit and loss] with the Marathon refining and supply side of the corporation. They have an immediate outlet for refined fuels through a vast retail network, which offers certain advantages and additional returns.”