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Sunday, March 1, 2015

The Buy: Best That Money Can Buy
On the hunt for a good fit, acquirers send multiples soaring

Source: CSP Magazine
By Kelly Kurt, Freelance writer

In January, at a gathering of its U.S. store managers in San Antonio, CST Brands Inc. rolled out a statement of core values. The words were not original. In fact, some of the newest faces in the room likely already knew them by heart:

“Be nice, have fun, sell stuff and be the best.”

Those words, after all, belonged to the late John MacDougall, founder of Nice N Easy Grocery Shoppes, the Canastota, N.Y.-based c-store chain jointly acquired by CST and CrossAmerica Partners LP late last year. Adopting MacDougall’s mission was more than a kind gesture to the former Nice N Easy employees now on CST’s payroll. To CST chairman and CEO Kim Lubel, a key component of CST’s acquisition strategy is leveraging best practices so that taking over is more about “coming together.”

“That,” Lubel explained a few days after the meeting, “is really where we’re going to win on the acquisition front.”

Across the industry, winning on the acquisition front is getting harder and more expensive. Major chains such as 7-Eleven and Alimentation Couche-Tard; active buyers including Energy Transfer Partners (ETP), CST Brands and GPM Investments; and a host of regional operators are all expected to be in hot pursuit of an increasingly available but limited supply of quality c-store assets.

Consolidation in the industry is accelerating, fomented by a “perfect storm” of low interest rates, readily available capital and quality, family-owned operators and other retailers seizing the opportunity to sell.

“When something becomes available, you see everybody interested,” says Dennis Ruben, executive managing director of NRC Realty & Capital Advisors, Chicago.

It’s a good time to be a buyer, says Bill Walljasper, senior vice president and chief financial officer of Casey’s General Stores, one of a few publicly traded companies left in the channel. The Ankeny, Iowa-based operator of more than 1,800 stores is persistently on the hunt for new acquisitions.

“I wouldn’t necessarily say there is a frenzy going on, but certainly there is an appetite for M&A activity in the convenience-store space,” Walljasper says. “We’ve seen a number of larger deals happen in our industry over the last year or two. And I think you’ll continue to see rollup.”

Buying Power

The prospective-buyer lists that Ruben develops are longer than they used to be. One reason: Buyers are less constrained by geography.

“It used to be that Sunoco was more East Coast-based and CST was more in the South,