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Friday, April 5, 2013

Insider's View: A Q1 M&A and Capital Markets Review

More players chasing fewer assets
Source: CSP Daily News
By Dennis L. Ruben

SCOTTSDALE, Ariz. -- Last year was truly a banner year for merger and acquisition activity in the convenience store industry. We witnessed the culmination of major oil company retail asset divestitures, as well as a very aggressive acquisition program by 7-Eleven Inc.

There was also a wave of activity on the master limited partnership (MLP) front, with several major industry players either filing registration statements for initial public offerings (IPOs) or exploring this alternative. Meanwhile, other major industry participants were also growing aggressively through acquisitions or new-store development.

Based on the transactions that were reported in the first quarter of 2013, it appears that the trends and developments we saw in 2012 will continue well into this year, with some changes.

Dennis RubenObviously, since most of the major oil companies have divested their retail asset portfolios, it will become that much more difficult for buyers to find large portfolios of stores to acquire. Similarly, with the proliferation of MLPs and other large companies with access to significant amounts of capital, either through the public capital markets, the private capital markets, or through the ability to obtain debt financing on reasonable terms, there will clearly be more players chasing fewer assets.

Presumably, that will have the effect of driving up purchase price multiples. It will be interesting to track these trends as the year progresses.

Here's a look at where the industry stood as the first quarter of 2013 ended:

MLP Momentum Continues
Coming on the heels of a number of IPOs in 2012 involving MLPs, several other industry players either commenced the IPO filing process or began an analysis of the merits of using an MLP structure. Western Refining Inc., El Paso, Texas, announced that it authorized its management to explore the formation of an MLP and the filing of a registration statement for an IPO in connection therewith. Western's retail group operates 200 c-stores and gas stations in the Southwest.

Other major industry players have openly commented