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Saturday, January 1, 2022

Convenience Store Industry M&A Review and Outlook: 2021

Source: CSP Daily News
By Dennis L. Ruben, Executive Managing Director | Jacob Johnson, Vice President


The year 2021 was certainly remarkable in many respects. Our country, and the rest of the world, was trying to recover from the worst pandemic in a century, and the discovery of new strains of Covid-19 continue to threaten that recovery. The political landscape in this county has never been more combative, with politicians staking out positions on both ends of the political spectrum with few public efforts at compromise or bipartisan legislation. Inflation is at a 40-year high, and unemployment numbers are lower than they have been in years. On the positive side, tax rates have not increased in recent years, and the Federal Reserve has kept interest rates extremely low, although most Federal Reserve officials indicated in mid-December that they were prepared to raise short-term interest rates at least three times in 2022 in order to cool high inflation.

Purchase Price Multiples

As far as merger and acquisition activity in the convenience store industry in 2021 is concerned, it was a fairly active year—not as much as in years before Covid—but active, nonetheless. The biggest story, of course, was 7-Eleven’s acquisition of Speedway from Marathon Petroleum. Based on the stated purchase price of $21 billion and the pre-closing EBITDA of $1.5 billion, that would equate to a purchase price multiple of 14x. However, 7-Eleven indicated that after taking into consideration synergies of the combination, tax savings and sale-leaseback transactions, the “effective” purchase price multiple on the deal was 7.1x. Another notable transaction was Casey’s General Stores’ acquisition of Buchanan Energy for a net investment of $500 million. According to published reports, Casey’s paid a 10.6x multiple for Buchanan Energy. Most of the other transactions that were completed in 2021 were private and, therefore, purchase prices and multiples were not reported. However, the trends we have observed support the notion that multiples have remained relatively strong in 2021, notwithstanding the headwinds that the industry has faced. On relatively small to mid-size transactions, it is common to see multiples in the high single digits. For the larger transactions, double digit to mid-teen multiples have not been unusual. This, of course, is based on store-level EBITDA for the previous twelve-month period. Most of the purchasers of companies and portfolios with higher multiples were able to factor in synergies from the combination of entities, tax savings and other benefits which would effectively reduce the multiple to lower multiples.

Effects of Covid on Industry M&A

The recurring theme for the convenience store industry is that it is incredibly resilient. During the worst part of Covid when many businesses were closed and people were told to stay home, convenience stores were considered “essential businesses” and remained open. As a result, most of them thrived during that period. On the other hand, the restaurant industry in general suffered badly during the same period. Many buffet-style restaurants closed permanently, as did many fine dining restaurants that could not survive long-term closures. Meanwhile, restaurants such as quick service restaurants and pizza chains, which offer menu items similar to those offered in most convenience stores, fared well. Although many M&A deals that were in the pipeline during the worst part of Covid were either put on hold or abandoned altogether, activity started to pick up again in the fall of 2020 and continued throughout 2021. Nonetheless, the industry has faced and continues to face many challenges and headwinds which will continue to affect company performance and M&A activity and purchase price multiples for the foreseeable future.

Industry Challenges and Headwinds

  • Covid and its Effects—Both Bad and Good. The Covid pandemic has taken a tremendous toll in terms of human life and the adverse effects on our economy. Shutdown orders, vaccination mandates and other government-imposed regulations and requirements made it much more difficult to conduct business, and many of those requirements are still present. As it relates to the industry, operators were forced to pay higher hourly wages to obtain and keep employees during the worst part of the pandemic, and they were also required to pay “stay bonuses” as well. Those increased labor costs have continued to plague the industry. Furthermore, operators were forced to spend significant sums for personal protection equipment at stores, such as plexiglass partitions, masks for employees, hand sanitizer for employees and customers, and the like. Those costs have not been insignificant and will likely continue for some period of time. On the other side of the coin, most operators did quite well during the worst part of Covid. Since convenience stores were designated “essential businesses”, they remained open throughout the worst of it all. Although vehicle travel was reduced dramatically starting in the first quarter of 2020 and fuel volume with it, fuel margin was extremely strong during that period and, in most instances, served to offset the drop in volume. Furthermore, inside sales stayed very strong because many people felt more comfortable shopping at convenience stores than grocery stores and other conventional stores for their needs. As a result, most operators reported very positive numbers during the height of Covid and those overall numbers did not appear to subside significantly, thereafter.
  • Labor Shortages. Although this issue is somewhat related to Covid, labor shortages are a huge problem for the industry right now. Most operators we know have had a great deal of difficulty in getting and keeping employees, even when they offer signing bonuses. There are several factors at work here. Unemployment rates have been at extremely low levels in most states. Furthermore, the unemployment benefits paid to individuals during the height of Covid may have provided some disincentive to work. A portion of the workforce believed that they could make more money by staying home than by working, which only served to exacerbate the problem.
  • Supply Chain Issues. Many operators have told us that they have experienced and continue to experience severe supply chain issues from suppliers. We have heard reports of shortages of energy drinks, soft drinks, hot dogs, paper and plastic products, and various items normally provided by the major convenience store food suppliers. This has resulted in some empty shelves in many instances, which has had a ripple effect on the industry. Sales cannot be realized on missing items and, as a result, profit is also affected. Furthermore, where shortages persist for sustained periods of time, they will certainly have an adverse effect on EBITDA numbers and resulting purchase price multiples. Hopefully, these shortages will be short-lived but are of continued concern to the industry.
  • The Future of EV. Everyone in the industry talks about electric vehicles and their potential effect on the convenience store industry. More and more automobile manufacturers are increasing their production of electric vehicles and models. In addition, charging stations are popping up everywhere—in shopping centers, office building parking lots and elsewhere. Some convenience stores have added them, but not to any great degree. Recently, it was announced that a coalition of electric companies has formed to support the creation of an EV charging network throughout the country. Furthermore, the Infrastructure Investment and Jobs Act currently pending in Congress would allocate funds to research incentivizing large-scale production and consumer adoption of electric vehicles, supported by a $7.5 billion commitment to add 500,000 electric vehicle stations to the national grid. The forces behind EVs are significant and will certainly have a major impact on the convenience store industry in the future. Operators will need to determine the best way to respond to this challenge. Adding charging stations at stores may be one solution, but this option has its own challenges too. Current charge times for an electric vehicle are 30 minutes or more, and it does not seem likely that the typical convenience store customer will be willing to wait around while his or her vehicle is charging. Once charging times are significantly reduced, this should be less of an issue.


Although there was a fair amount of merger and acquisition activity in 2021, most of the companies being acquired were small to mid-size companies. Furthermore, many of the larger companies in the industry have already been acquired, and the remaining ones do not seem interested in a sale transaction in the foreseeable future. However, with the ongoing consolidation of the convenience store industry into a handful of players, it seems likely that we will continue to see sales of smaller and mid-size companies. More importantly, as more and more operators witness firsthand the effects of the economies of scale that the larger players are able to realize, as well as the difficulty in competing with them, while also battling the broader industry headwinds they are facing, many operators may very well conclude that a sale in the current economic climate is the right thing to do, especially since interest rates have been at historic lows, debt and equity capital is plentiful, and purchase price multiples remain at record highs.

Significant M&A Transactions in 2021

7-Eleven Inc.

In 2021, 7-Eleven Inc. completed the largest acquisition in convenience store history through its $21 billion acquisition of the Speedway convenience store chain from Marathon Petroleum Corp. The transaction included approximately 3,800 stores located in 36 states. The addition of Speedway brought 7-Eleven’s total North American portfolio to approximately 14,000 stores and diversifies 7-Eleven’s presence to 47 of the 50 most populated metropolitan areas in the United States, as well as expanding its company-operated store footprint. In connection with the acquisition, 7-Eleven divested 293 stores in order to satisfy an agreement with the Federal Trade commission. CrossAmerica Partners LP purchased 106 stores for $263 million, which were located in regions of the United States within CrossAmerica’s existing asset base. Those locations sold a total of approximately 160 million gallons of motor fuel during the 12-month period ended October 31, 2020 and had aggregate merchandise sales of approximately $134 million during the same period. Jacksons Food Stores and Jackson Energy acquired an additional 63 Speedway and 7-Eleven stores in California, Arizona and Nevada for an undisclosed price. Anabi Oil acquired the remaining 124 Speedway and 7-Eleven stores in the Midwest, Northeast, Texas and Florida for an undisclosed price.

Parkland Entities.

Parkland USA and its Canadian parent Parkland Corp. were extremely active in acquisitions last year. In February, Parkland USA entered into an agreement to acquire Conrad & Bischoff Inc., an Idaho-based retail, commercial wholesale and lubricants business with 19 company-owned convenience stores and 39 dealer sites. As a result of this transaction, Parkland Corp. established a fourth U.S. regional operating center in Idaho Falls, Idaho. In July, Parkland Corp. agreed to acquire Petroles Crevier Inc., a subsidiary of Crevier Group, a retail and wholesale fuels and lubricants business based in Montreal. The transaction included 174 gas stations, of which 36 were company-operated and 138 were retail dealer sites. This transaction was expected to add annual fuel and petroleum product volume of approximately 185 million gallons. Parkland Corp. also agreed to purchase 156 Husky gas stations and convenience stores from Cenovus Energy Inc. As part of that same transaction, Federated Co-operatives Ltd. acquired an additional 181 sites, for a total purchase price of approximately $420 million for all 337 stores. The sites acquired by Parkland are in the Vancouver and Vancouver Island areas of British Columbia; Calgary, Alberta; and the Toronto area in Ontario, and consist of 109 company-owned sites and 47 dealer locations. Parkland indicated that it would convert a significant number of the company-owned sites to On the Run and expected that the transaction would add annual fuel volumes of approximately 105 million gallons to its network. In November, Parkland USA entered into an agreement to purchase Parker’s Energy wholesale unit, which serves businesses throughout the southeastern United States. That same month, Parkland USA also entered into an agreement to acquire all of the assets of Urbieta Oil Co., which consist of 94 retail locations concentrated in the Miami, Florida market. Of the total acquisition, 54 of the sites included real estate. Urbieta Oil Co. had 2020 annual fuel sales of approximately 122 million gallons. Finally, Parkland USA entered into an agreement to purchase the assets of Lynch Oil and certain of its affiliates. The acquisition consisted of five convenience stores and forecourts, two travel centers, two car washes and a rail storage terminal, all of which are located in southern and central Idaho.

Casey’s General Stores Inc.

Casey’s General Stores Inc. was also very acquisitive in 2021. In May, Casey’s closed on the acquisition of Buchanan Energy, which was the largest acquisition in Casey’s history, for a cash purchase price of $580 million, which included tax benefits valued at $80 million, for a net after-tax purchase price of $500 million. Buchanan Energy, operating as Bucky’s Convenience Stores, consisted of 94 retail convenience stores and 74 dealer locations, as well as multiple parcels of real estate for future new store development. The stores were primarily located in the Midwest, with the majority of the stores in Nebraska, and Illinois. In June, Casey’s closed on the purchase of 48 convenience stores from Circle K owner Alimentation Couche-Tard Inc., all of which are located in Oklahoma and primarily in the Oklahoma City market. All but a few of the stores were leased. Later in the year, Casey’s entered into an agreement to purchase 40 Pilot convenience stores from Pilot Corp. for a purchase price of $220 million. The stores are located in Tennessee, and Kentucky, with many of the locations in the Knoxville, Tennessee market.

Alimentation Couche-Tard Inc./Circle K Stores, Inc.

In March, Couche-Tard announced plans for the divestiture of approximately 306 convenience stores in the United States and Canada. Of the total, 269 are located in 25 states in the United States, 37 sites are located in six provinces in Canada, 122 are fee owned, and 184 are leased. The stores average 2,600 square feet and are located on lots averaging 29,500 square feet. Couche-Tard engaged NRC Realty & Capital Advisors LLC to coordinate the sale of these stores. In July, the company announced that it entered into an agreement to acquire the Esso, Wilsons Gas Stops and Go! Store convenience store brands through its purchase of Cape D’Or Holdings Ltd., Barrington Terminals Ltd. and related entities. The transaction included 179 corporate owned and operated convenience retail and fuel locations, 147 dealer locations and a marine fuel terminal in Halifax, Nova Scotia. Couche-Tard also entered into an agreement to acquire the convenience store assets of ARS Fresno LLC and affiliated companies, consisting of 35 locations operating under the Porter’s brand, located primarily in Oregon and western Washington. In December, Couche-Tard acquired 19 convenience stores and two non-operating properties in New Mexico from Pik Quik Stores Inc. Couche-Tard also acquired 17 convenience stores from Slidell Oil Co. operating under the Purple Cow banner, as well as 23 wholesale accounts across three southeastern states.

Mountain Express Oil Co.

Mountain Express Oil Co. was also extremely active in acquisitions this past year. In March, the company acquired West Hill Ranch, a six-store convenience store chain based in central Florida. Mountain Express also acquired New Orleans-based Brothers Food Mart which has 50 locations in the region. Under the agreement, Mountain Express Oil purchased a majority interest in Brothers Food Mart’s stores and is licensed to use the store name. The company intends to expand the retail brand into more southern markets, including North Carolina, Atlanta, Memphis and Dallas, while also growing Brothers Food Mart’s Louisiana footprint. In November, Mountain Express agreed to purchase all of the retail and wholesale fuel assets of Texon Oil Co. The assets consist of 24 Sunoco-branded retail gas stations located in central and southern New Jersey and eastern Pennsylvania markets.

Shell Oil Products US.

Shell Retail and Convenience Operations LLC, a wholly owned subsidiary of Shell Oil Products US, entered into an agreement to acquire 248 company-owned fuel and convenience retail sites from the Landmark group of companies, whose stores operate in Texas under the Timewise brand. The agreement also included supply agreements with an additional 117 independently operated fuel and convenience stores. Shell had largely exited retailing in the United States in the early 2000s, opting instead to pursue upstream profits rather than downstream retail opportunities. This acquisition marks Shell’s first major acquisition in recent years, and Shell indicated that the Landmark acquisition would serve as the foundation that will allow the company to grow its company-operated network in the United States.

EG America Inc.

Over the past few years, EG America, a subsidiary of EG Group, was probably more active in convenience store acquisitions than any other industry player. However, 2021 was a bit of a slower year for them in terms of acquisitions. In September, EG America acquired eight convenience stores located in Connecticut from Mercury Fuel Services Inc. Mercury also sold an additional 12 stores to affiliates of CCO LLC, which operates as Sam’s Food Stores. Later in the year, EG America entered into an agreement to purchase 34 company-operated fuel and convenience store locations in Georgia and South Carolina from Sprint Food Stores Inc. As a result of this acquisition, EG America will operate more than 1,750 sites across 33 states in the United States. In December, it was disclosed that EG America was selling its Minit Mart convenience stores in Wisconsin and Minnesota and was exiting those markets. It was also disclosed late in 2021 that EG Group’s owners were exploring a range of strategic alternatives for the company. One of those rumored alternatives was the merger of EG Group with Asda Group, a United Kingdom grocery chain. In February, the owners of EG Group acquired control of Asda in a deal valued at approximately $9 billion. Subsequent rumors and industry speculation centered around a possible outright sale of EG Group, which knowledgeable sources believe should fetch at least $15 billion.

Refuel Operating Co. LLC.

Refuel Operating Co. LLC has grown rapidly over a fairly brief period of time, growing from a single store operation in 2010 to a network of nearly 130 convenience stores in 2021 spread across a five state footprint. In June, Refuel closed on the acquisition of 16 convenience stores from Wag-A-Bag LLC. The stores are either branded Shell or Valero and are in the Round Rock and Austin, Texas areas. In August, Refuel entered into an agreement to acquire the assets of Albemarle Oil Co., a North Carolina-based convenience store and retail fuel business operating under the ALCO brand. ALCO owns and operates 28 convenience stores and eight Dairy Queen quick service restaurants, all of which are located in North Carolina and South Carolina.

GPM Investments LLC.

GPM Investments LLC, a wholly owned subsidiary of Arko Corp., signed an agreement to acquire 61 Express Stop convenience stores in Michigan, and Ohio. The transaction will complement GPM’s existing 165 stores in Michigan and nine stores in Ohio. In September of 2020, Arko Holdings entered into a definitive agreement with Haymaker Acquisition Corp., a publicly traded special purpose acquisition company, to form a business combination. This acquisition marked GPM’s first since Arko became a public company listed on Nasdaq late in 2020. In November, GPM agreed to acquire 36 Handy Mart convenience stores located in North Carolina from E.J. Pope & Son Inc. Approximately 20 branded quick service restaurants or proprietary food offerings are located at the stores, and all of them sell fuel. With the Handy Mart acquisition, GPM has a total of 3,100 stores, of which 1,415 are company operated and 1,675 are dealer sites where GOM supplies fuel.

Other Notable M&A Transactions

  • Pester Marketing Co., which does business as Alta Convenience, sold to a joint venture entity between Fortress Investment Group LLC and a subsidiary of Phillips 66 Co. The assets in the joint venture consist of Pester’s original 47 company-operated stores and the stores acquired from Western Convenience Stores Inc. and Kwik Stop, which brought the current store count to more than 100. All of the stores are in the Rocky Mountain region. In mid-December, Alta Convenience acquired Western Oil’s 46 Petro-Mart convenience stores and 39 wholesale dealers. The stores are located in the greater St. Louis region in Missouri and Illinois.
  • Atlantis Management Group acquired 13 Shell-branded retail gas stations from WMA LLC, all of which are located in New England. The sale also included a Shell-branded wholesale supply-only business serving retail gas stations.
  • Family Express Corp. acquired six Freedom Express locations in Indiana from Freedom Oil LLC. NRC Realty & Capital Advisors LLC served as exclusive financial advisor to Freedom Oil in connection with the sale.
  • HollyFrontier Corp. and its transportation business, Holly Energy Partners LP, entered into definitive agreements to acquire Sinclair Oil Corp. and Sinclair Transportation Co. from The Sinclair Cos. Under the terms of the agreement, the company will acquire Sinclair’s branded marketing business and all commercial activities, renewable diesel business and two refineries based in the Rocky Mountains. The transaction was valued at $1.8 billion.
  • MacEwen Petroleum Inc., an independent Canadian fuel and retail convenience provider, acquired the business assets of Quickie Convenience Stores Corp., which consisted of 51 convenience stores, including 22 gas stations, in eastern Ontario and Quebec. The transaction will complement and almost double MacEwen’s portfolio of stores. MacEwen Petroleum has operations in Ontario, Quebec, and Manitoba.
  • Murphy USA closed on its $645 million acquisition of QuickChek Corp. The transaction consisted of 157 convenience stores in the northeastern United States. This transaction brings the Murphy’s store count to more than 1,650.
  • Nouria Energy Corp. completed the acquisition of 17 VERC convenience stores, including two with car wash operations, in Massachusetts and southeastern New Hampshire. The transaction brings Nouria’s retail network to 146 company-operated locations stretching from Hartford, Connecticut to Waterville, Maine.
  • Pilot Co. acquired Southern Counties Oil Co. LP, dba SC Fuels. The company operates 47 proprietary cardlock locations and delivers branded and unbranded gasoline, diesel fuel, alternative fuels, lubricants and other petroleum products, as well as offering fleet card programs, to more than 11,000 customers in 10 states.
  • Sampson-Bladen Oil Co. Inc. and its affiliates acquired the assets of Rusher Oil Co. and Rushco Food Stores Inc. Rusher Oil Co. is a distributor of Amoco and BP fuels to 19 branded convenience stores and one commissioned marketer location in North Carolina. Rushco Food Stores Inc. operated 19 branded convenience stores under the name Rushco Markets. With the purchase of the Rushco Markets, Sampson-Bladen increased its store count to 109 stores.
  • Southwest Convenience SPE LLC, a newly formed limited liability company, acquired the convenience store assets of Quik Mart Stores Inc., a chain of 17 convenience stores in the Tucson, Arizona metropolitan area. All of the Quik Mart stores except six sell fuel, and all of the stores with fuel offerings except one sell Chevron-branded fuel. NRC Realty & Capital Advisors, LLC served as exclusive financial advisor to Quik Mart in connection with the sale.
  • Tri Star Energy acquired the assets of Alabama-based Herndon Oil Corp., which consist of 13 Southern Traders convenience stores and Herndon’s Shell-branded fuel distribution operations.
  • True North Energy, a joint venture between the Lyden family and Shell Oil Co., completed the purchase of 19 fee-owned convenience store and gas station locations and three unattended fueling locations from Titletown Oil Corp. and its affiliates, which are located primarily in the Green Bay, Wisconsin market. The transaction also included Titletown’s wholesale fuel operations which supply Shell and BP branded fuel to more than 70 locations, as well as its fuel transportation assets. True North Energy has 165 company-operated stores and supplies fuel to more than 255 Shell and BP branded dealers.
  • Missouri-based Warrenton Oil Co., operator of FastLane Convenience Stores, agreed to purchase 18 Abel’s Quik Shops from Abel Oil Co. The stores are located in northeast Missouri. Warrenton Oil operates 37 FastLane locations throughout Missouri.