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Friday, July 5, 2013

Insider's View: A Q2 2013 M&A and Capital Markets Review

Demand exceeds supply, pushing up multiples
Source: CSP Daily News
By Dennis L. Ruben

SCOTTSDALE, Ariz. -- The second quarter of 2013 was relatively quiet in terms of significant merger-and-acquisition activity, with a few notable exceptions.

GPM Investments LLC announced its purchase of 263 stores from VPS Convenience Store Group. Hess Corp. continued its efforts to divest its downstream retail business.

Although 7-Eleven Inc. continues to complete acquisitions and build new stores, there were no blockbuster deals completed by them during the second quarter. 7-Eleven did, however, make big news by announcing the divestiture of 145 sites in six states.

Many of the other major industry players, such as Alimentation Couche-Tard Inc./Circle K, Casey's General Stores Inc., Kum & Go LC, Wawa Inc. and Susser Holdings Corp. are continuing their expansion programs by building or acquiring stores in existing and new markets.

Based upon the levels of interest we have seen for quality convenience store assets, it seems clear that the demand for such properties far exceeds the supply and will continue to push purchase price multiples even higher than we have seen previously.

Hess Corp.

The drama continued into the second quarter with respect to the conflict between senior management of Hess Corp. and major investor Elliott Management Corp. Elliott had proposed its own slate of five new directors and urged a reevaluation of the company's strategy and a possible breakup of the company. The dispute continued right up to the May 16 annual shareholders meeting.

Dennis RubenPartially in response to pressure and concerns that had been expressed by Elliott and other shareholders, the company announced that it was separating the offices of chairman and chief executive officer. Just before the annual meeting, the company and Elliott announced that they had reached an agreement concerning the composition of the board.

Hess also reaffirmed its commitment to exit the downstream retail business. In early June, Hess announced that it had agreed to purchase the remaining 56% of WilcoHess LLC that it did not already hold. The company stated that the acquisition of the remaining interest in WilcoHess will enable it to continue its divestiture of the downstream business in a manner that will maximize value for shareholders.

Although the company has not announced a timetable for the divestiture of the retail network, it would appear that Hess is actively working tow