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Monday, January 1, 2024

Convenience Store Industry M&A Review and Outlook: 2023

Source: CSP Magazine
By Dennis Ruben, Executive Managing Director, NRC Realty & Capital Advisors


The year 2023 can best be described from a merger and acquisition perspective as the year of the small to medium size transaction, following the trend established in 2022. Although there were a few very large transactions, such as Maverik, Inc.'s purchase of Kum & Go, the acquisition by Majors Management LLC and Alimentation Couche-Tard Inc. of all of the MAPCO stores from Companie de Petroleos de Chile S.A. (COPEC), and BP Products North America Inc.'s acquisition of TravelCenters of America Inc., the vast majority of transactions which were closed in 2023 involved 10 to 50 convenience stores. There are several explanations for this. First and foremost, there are simply not that many big chains or portfolios of convenience stores around anymore that might be available for sale. Most of the transactions involving large companies or portfolios of convenience stores took place a few years ago. Secondly, many operators have been making record earnings in the past couple of years and do not see a compelling reason to sell. Third, the current economic climate of record high interest rates has had a dampening effect on M&A activity, resulting in a reduced number of potential bidders and downward pressure on the purchase prices that bidders are willing and able to pay. As discussed in the next section, the current political turmoil in the world and national stages has also had a significant impact on the economy in the United States generally and the convenience store industry specifically. Notwithstanding the foregoing constraints, there is still a vibrant market for quality convenience store assets and companies with strong financial performance which are in desirable markets.

Political, Economic and Industry Challenges

Political. National and international political issues have dominated the world stage in the past year. At the international level, the war in Ukraine continues with no end in sight. The conflict between Israel and Hamas which began in October has already taken a huge toll in terms of loss of life and physical destruction in the region and only seems to be escalating. At the national level, the inability of Congress to work in a bipartisan manner to advance meaningful and much needed legislation on a number of important issues, including long-term federal budgets, has virtually brought our government to a standstill.

Economic. COVID was a monumental event for our country and the rest of the world, both in terms of human life and economic impact. Fortunately, our national economy was able to survive the economic consequences of the pandemic and is probably stronger than it has been for quite some time. However, the rate of inflation was increasing at an unacceptable rate, and the Fed decided it needed to cool the economy by a series of interest rate increases. In March of 2022, the Fed funds rate was essentially zero. Over the last two years, the Fed increased the rate 11 times, and it now stands between 5.25% and 5.5%. That is the highest level in two decades. It appears that this strategy has been partially successful, because inflation has eased from its high levels, without a significant increase in unemployment. The Fed announced in December that it would hold rates steady and would likely reduce them at least three times during 2024, probably by one-quarter of a point each time. The high interest rate environment we have experienced in 2023 has had a number of effects on our industry and M&A, which will be discussed further in the section that follows. Furthermore, people have seen their disposable income reduced by virtue of inflation and higher costs of credit for everything from home mortgages to auto loans to credit cards. A saving grace in 2023 was the fact that gasoline prices were significantly lower last year than in previous years, with regular gasoline prices under $3.00 per gallon in many markets.

Industry. Although everyone in the industry wants to talk and fret about electric vehicles (EV), the concern seems to be somewhat premature. Although our government has talked a great deal about providing tax credits, grants and other incentives for the development of a national system of charging stations on our highways and purchases of EVs, that has not materialized in any significant way as of yet. Until the technology can provide a significantly longer battery life, and people are more motivated to purchase EVs, most Americans will remain enamored with their gasoline powered automobiles. All of this is certainly a good omen for the convenience store industry. Other issues that continue to plague the industry are the high cost of labor and the low unemployment rates in most parts of the country. This has been a perennial problem for the industry although it has seemed to have eased a bit in the last year. Operators are being forced to pay higher wages to recruit and keep employees, and they are having to cope with higher minimum wage laws and competition with other industries that are offering more favorable wages.

Purchase Price Multiple Trends

Before COVID and the Fed's 11 interest rate increases starting in 2022, it was not unusual to see certain high-quality convenience store companies or portfolios sell at double digit purchase price multiples (based on store-level EBITDA without consideration of corporate G&A). This was typically the case for larger chains in desirable markets, with stores in excess of 4,000 square feet and at least one acre lots and a quality foodservice program. Most of the larger deals have already been done, and for a variety of reasons, transactions with double digit multiple purchase prices are now fewer and far between. The 5.25% interest rate increases by the Fed over the last two years certainly has been a major factor in M&A activity in 2023. In addition, many of the traditional lenders to the industry have adopted a more conservative approach to underwriting transactions, and they have tended to impose lower advance rates and more stringent financial covenants, and they have also tended to shy away from new customers. Even those prospective purchasers who could pay cash to close a deal would invariably factor in the current interest rate environment in making their offers because they were either utilizing funds from a credit facility to pay for the acquisition, or they would want to put senior debt on the assets at a later date. Consequently, the interest rate hikes have truly affected everyone, although not always at the same time or in the same way. Although purchase prices and multiples are typically not disclosed in privately negotiated transactions, based on information we have received, we believe that multiples have held up pretty well in 2023 despite the high interest rate environment, and we have seen transactions with high single-digit multiples for quality assets in good markets. If the Fed continues to pause interest rate increases and actually reduces them three or more times in 2024, as has been predicted, that should have a positive impact on both M&A activity and purchase price multiples in 2024.

Significant M&A Transactions

Maverik, Inc. Perhaps the biggest convenience store deal of the year was Maverik, Inc.'s acquisition, with its parent company, FJ Management, of Kum & Go, a family-owned chain based in Des Moines, Iowa, with more than 400 locations in 13 states from Krause Group. As part of the transaction, Maverik acquired Solar Transport, a tank truck carrier and logistic provider owned by the Krause Group. Prior to this acquisition, Maverik, based in Salt Lake City, had approximately 400 locations in 12 western states, making it the largest independent fuel marketer in the Intermountain West.

BP Products North America Inc. In May, BP Products North America Inc. completed its $1.3 billion acquisition of TravelCenters of America Inc. (NASDAQ:TA). The acquisition added a network of approximately 280 travel centers, located on major highways across the United States and almost doubled BP's global convenience gross margin. BP projected that, as a result of this transaction, the company's EBITDA would grow to around $800 million by 2025. The company also stated that the TA acquisition would provide growth opportunities for most of BP's transition growth engines, including EV charging via BP pulse, convenience, biofuels/renewable natural gas (RNG) and hydrogen. As of year-end 2022, BP had 1,224 company-owned and operated convenience stores in the United States.

Majors Management LLC. In November, Majors Management LLC completed its transaction with Companie de Petroleos de Chile S.A. (COPEC) for the acquisition of 192 MAPCO-branded convenience stores in Tennessee, Alabama, Georgia, Mississippi, Arkansas and Kentucky. The transaction, which was announced in April, also included MAPCO Express Inc.'s wholesale fuel division, loyalty program, brand and other intellectual property. Prior to this transaction, and a companion transaction with Alimentation Couche-Tard Inc., MAPCO, based in Franklin, Tennessee, had 304 locations throughout the south. MAPCO was a subsidiary of COPEC, which had acquired the chain in 2016. Majors Management, based in Lawrenceville, Georgia, is an owner, developer and operator of convenience stores and a distributor of branded and unbranded motor fuels. Majors Management and its affiliates currently supply fuel to more than 1,400 convenience stores in approximately 20 states.

Casey's General Stores Inc. Casey's General Stores Inc. (NASDAQ:CASY) was extremely active in the acquisition sector in 2023. In March, Casey's acquired five DeliMart convenience stores in the Iowa City, Iowa area. In August, Casey's agreed to acquire 63 convenience stores from EG America LLC, a subsidiary of EG Group Ltd. The stores are located in Kentucky and Tennessee and operated under the Minit Mart and Certified Oil banners. Finally, in November, Casey's acquired 22 Lone Star Food Stores located in and around Sherman, Texas from W. Douglass Distributing Ltd. The Lone Star acquisition represented Casey's first transaction in Texas and is the retailer's 17th state. NRC Realty & Capital Advisors, LLC served as financial advisor to Douglass Distributing in connection with the transaction. Casey's, based in Ankeny, Iowa, has more than 2,500 convenience stores in 17 states.

Alimentation Couche-Tard Inc. Alimentation Couche-Tard Inc., parent company of Circle K Stores Inc., was extremely busy with acquisitions in 2023 as well. In April, the company finalized the acquisition of 44 Big Red Stores throughout Arkansas from Summerwood Partners LLC of Bryant, Arkansas. In May, Couche-Tard acquired the 11-location Dion's Enterprises convenience store chain located in the Florida Keys. Circle K already operated about 10 stores in the Florida Keys and the Dion's acquisition doubled the company's footprint in that region. In November, Couche-Tard completed the transaction with COPEC for the acquisition of 112 company-operated fuel and convenience retail sites from MAPCO Express Inc. The stores are located in Georgia, Tennessee, Alabama and Kentucky, and the deal also included surplus property and a logistics fleet. Earlier in the year, Couche-Tard announced that TotalEnergies had accepted its offer to acquire its European retail assets, consisting of approximately 2,200 gas stations and convenience stores throughout Europe. In connection with the transaction, Couche-Tard would acquire 100% of TotalEnergies retail assets in Germany and the Netherlands, as well as a 60% controlling interest in the Belgium and Luxembourg entities, for a purchase price of approximately $3.3 billion to be paid in cash. The transaction was expected to close in December.

Arko Corp./GPM Investments LLC. Arko Corp. (NASDAQ:ARKO) was also very active in 2023. In two instances, it closed on significant transactions which had been agreed to in 2022. In March, subsidiaries of Arko acquired the assets of Transit Energy Group and its affiliates, which consisted of approximately 135 convenience stores, supply agreements with approximately 190 independent dealers and a transportation business with 58 trucks and 78 tanker trailers that supports both the retail and wholesale businesses. All of the assets are located in the Southeastern United States and will grow Arko's retail store base into Alabama and Mississippi. The total purchase price for the transaction was approximately $370 million plus the value of inventory, of which $50 million is deferred, payable in two annual payments of $25 million on the first and second anniversaries of the closing. In June, Arko completed its acquisition of the retail and fleet fueling assets of WTG Fuels Holdings LLC, the owner of Uncle's Convenience Stores and Gascard fleet fueling operations. WTG consists of 24 company-operated Uncle's locations in Texas, as well as 68 proprietary Gascard-branded fleet fueling cardlock sites and 43 private cardlock sites. The acquisition also included nine independent dealer locations and three land parcels. The total purchase price for the WTG acquisition was $140.2 million plus the value of inventory at closing. Arko expects that the WTG acquisition will add approximately $14.9 million of EBITDA on an annualized basis after expected synergies. In November, Arko acquired seven Speedy's Food and Fuel sites in Arkansas and Oklahoma. Prior to the acquisition, Arko had supplied fuel to these sites, which were operated by an independent dealer. The total purchase price was approximately $13.7 million, plus the value of inventory at closing. With the Speedy's closing, Arko completed its 25th deal since 2013 and now has over 1,500 company-operated convenience stores in the United States.

Global Partners LP. Global Partners LP (NYSE:GLP) and Exxon Mobil Corp. (NYSE:XOM) acquired 64 Houston-area convenience and fueling facilities from Landmark Corp. In connection with the transaction, Global Partners and Exxon Mobil formed a new joint venture named Spring Partners Retail LLC to purchase the assets, with Global Partners acting as the management company and operator. The stores in the transaction are located in the Houston, San Antonio, Austin and Laredo, Texas markets.

Tri Star Energy LLC. Tri Star Energy LLC acquired the assets of Cox Oil Co., Inc., based in Union City, Tennessee, which consisted of 54 stores under the Little General Convenience Stores and Maverick Quick Shop brands in Tennessee and Kentucky. Of the 54 convenience stores, all but two are company operated. Twenty-one of the stores sell fuel under the Marathon brand, 13 sell fuel under the Shell brand and 20 are unbranded. Almost all of the stores offer one or more foodservice programs, primarily the company's proprietary Clucker's Fried Chicken program. NRC Realty & Capital Advisors, LLC served as financial advisor to Cox Oil in connection with the transaction.

SQRL Holdings LLC. Gas station and convenience store operator SQRL Holdings LLC and affiliates acquired 210 stores throughout the United States from an unnamed seller. As a result of this transaction, the Little Rock, Arkansas-based company is now among the top 25 chains in the country. This acquisition brings the total number of stations owned and operated by SQRL to 350 across 14 states.

Significant Wholesale and Related Transactions

Offen Petroleum LLC. In January, Offen Petroleum LLC announced that it had completed the acquisition of the wholesale division of Gas Depot Inc. and Gas Depot Oil Co., representing its entry into the Chicago market and the Great Lakes region. The acquisition added more than 150 new retail gasoline station and convenience store customers along with a portfolio of municipal customers. In October, Offen Petroleum acquired the wholesale fuel and related businesses from Douglass Distributing Inc. based in Sherman, Texas. Douglass is a recognized national leader in the propane, lubricant and wholesale and commercial fuel businesses, serving customers primarily in Texas and Oklahoma, and distributes more than 200 million gallons of fuel annually. Douglass' propane business has more than 4,600 residential customers, its wholesale business has more than 150 major customers, and its commercial business has more than 2,800 fuel, lubricant and diesel exhaust fluid customers. The acquisition also included Douglass' extensive fuel carrier business. Offen stated that it intends to establish an operations center in Sherman, Texas and will use that center as a platform to accelerate its growth in the Texas marketplace. NRC Realty & Capital Advisors, LLC served as financial advisor to Douglass Distributing in connection with the transaction.

RaceTrac Petroleum, Inc. RaceTrac Petroleum, Inc., through its subsidiary, Metroplex Energy, a fuel supply and trading company, completed the acquisition of Gulf Oil LLC in December. This was the largest acquisition in RaceTrac's history and included Gulf's brand in the United States and Puerto Rico, as well as all Gulf-branded distributor and license agreements comprising about 1,100 branded sites, and exclusive rights to market fuel at 11 Massachusetts Turnpike service plaza locations.

Chevron Corporation. Chevron Corporation (NASDAQ:CVX) announced in October that it had agreed to acquire all of the outstanding shares of Hess Corporation (NYSE:HES) in an all-stock transaction valued at $53 billion. New York-based Hess is a global independent energy company engaged in the exploration and production of crude oil and natural gas, with leading positions offshore Guyana, the Bakken shale play in North Dakota, the deepwater Gulf of Mexico and the Gulf of Thailand.

Other Notable M&A Transactions

Blarney Castle Oil Co. Barney Castle Oil Co. acquired the assets of Michigan-based Alpena Oil Co., consisting of six Louie's Fresh Market full-service grocery stores, 14 traditional convenience stores and one cardlock.

Consumers Cooperative. Consumers Cooperative acquired the assets of Landmark Services Cooperative, doing business as Alcivia, which consisted of 16 convenience stores located in Wisconsin. The stores operate under the Alcivia Country Store brand and offer Cenex fuel, and include six unattended Pump 24 locations that do not offer food or beverages.

Holiday Stationstores LLC. Holiday Stationstores LLC acquired 14 Holiday franchised fuel and convenience stores and one site under development from Coborn's Inc. St. Cloud, Minnesota-based Coborn's in an employee-owned grocery retailer with 77 grocery stores across six states operating under various banners.

Kent Kwik Convenience Stores. Kent Kwik Convenience Stores, an entity of The Kent Companies, purchased the assets of Tom Thum Food Stores Inc, based in Hialeah, Florida. The acquisition includes 14 company-owned Tom Thumb Food Stores and three Subway franchise locations which span from Fort Lauderdale to Key West. The acquisition serves to increase the Kent Companies portfolio to 88 company-owned and operated convenience stores, as well as 152 dealer sites, in eight states.

Love's Travel Stops & Country Stores. Love's Travel Stops & Country Stores completed the acquisition of EZ GO from Carey Johnson Oil Co. of Lawton, Oklahoma. The acquisition includes six truck stops located on Oklahoma turnpikes, five on the Kansas turnpike and 11 convenience stores in Oklahoma and Nebraska, for a total of 22 stores. Oklahoma City-based Love's has more than 610 locations in 42 states.

Nouria Energy Corp. Nouria Energy Corp. acquired the assets of H.A. Mapes Inc., a distributor of fuel and convenience store operator in Maine. The acquisition includes 13 owned locations and nine stores previously branded Harry's, as well as other dealer locations.

PacWest Energy LLC. PacWest Energy LLC of Meridian, Idaho, acquired the convenience store, dealer wholesale and transportation assets of Sun Pacific Energy Inc. The transaction consisted of nine large-format convenience stores, more than 130 branded dealer accounts and all transportation rolling stock. PacWest Energy, in a partnership with Jackson Energy and Jackson Food Stores Inc., owns, operates and supplies stores across nine western states.

Par Mar Oil Co. Par Mar Oil Co. acquired Santmyer Companies, Inc.'s 14 Red Rover convenience stores in Ohio. In addition, Countrywide Petroleum Co. acquired Santmyer's branded dealer wholesale business.

Petroleum Marketing Group Inc. Petroleum Marketing Group Inc. (PMG) acquired 43 company-operated convenience stores with fuel from Li'l Thrift Food Marts Inc., based in Fayetteville, North Carolina. All of the stores operate under the Short Stop brand and all but one sell fuel. PMG also purchased Mystic Oil Co. Inc., which sells fuel on a consignment and wholesale basis to approximately 150 branded and unbranded customers in Connecticut, Massachusetts, Rhode Island, New York and Vermont. Later in the year, PMG acquired nine company-operated Phoenix Mart convenience stores and one travel center from Springer Eubank Co. Inc., all of which are located in North and South Carolina.

Sierra Enterprises Oregon Inc. Sierra Enterprises Oregon Inc., an affiliate of S&S Petroleum Inc. of Mikilteo, Washington, acquired Leathers Enterprises Inc., a Shell-branded marketer and convenience retailer based in Portland, Oregon. The transaction includes Leathers Enterprises' 23 convenience stores in Oregon, nine of which are company-operated and 15 are managed through dealer consignment agreements. It also includes the Shell-branded distribution assets and the six transports and trailers owned by Leathers for use in fuel distribution to its locations.

United Pacific. United Pacific, through Apro LLC, acquired Boyett Petroleum's 10 company-operated petroleum marketing and retail convenience stores, which operate under the Cruisers brand and sell 76-branded fuel. In a separate transaction, Boyett acquired United Pacific's wholesale fuel distribution business, which consists of approximately 200 fuel supply accounts in three states.


Alimentation Couche-Tard Inc. (ACT), as part of the agreement reached with the Competition Bureau of Canada over its acquisition of the Wilsons gas station network, completed the sale of 52 sites to Quebec-based Harnois Energies. The transaction includes 34 corporate stations and 18 affiliated stations across Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland and Labrador. In July, Global Partners LP announced the sale of 54 non-strategic locations with gasoline in the Northeast and Mid-Atlantic. The sites are located in Connecticut, Massachusetts, Maryland, New Hampshire, New York, Rhode Island, Virginia and Vermont. NRC Realty & Capital Advisors, LLC was engaged by Global Partners to coordinate and manage the marketing and sale of the locations. In September, ACT announced the sale of 68 Circle K sites across 21 states in the United States. Of the total, 37 are fee-owned and 31 are leased, while 42 properties sell fuel and the balance are convenience stores only. NRC Realty & Capital Advisors, LLC was engaged by ACT to coordinate and manage the marketing and sale of the sites.


Most of the owners of the larger chains who were interested in selling did so prior to COVID, and the current economic climate, together with interest rates that we haven't seen in two decades, has contributed to the smaller, and fewer, deals that we witnessed last year. In addition, operators were generally happy with the financial performance of their companies and were in no hurry to look for an exit. As a result, many operators who were willing to consider selling their companies backed away because they had unrealistic price expectations. Fuel volumes have generally bounced back from the COVID lows and fuel margins have remained relatively stable as well, although we have observed reduced fuel margin trends recently in certain markets. Notwithstanding all of the challenges described herein, based on the transactions we either worked on or were completed in 2023, whether M&A or divestiture engagements, we are convinced that there is still intense interest in acquiring quality companies, portfolios and individual convenience stores, and there are substantially more buyers than sellers. In addition, there are a number of private equity players, either individually or through joint ventures with operating companies, who continue to show keen interest in making acquisitions in the industry. Hopefully, if interest rates decrease significantly in 2024, that should have an extremely positive effect on the industry as a whole and M&A activity in particular. Many operators who have been sitting on the sidelines for a variety of reasons may very well decide that it is time to move forward in a different direction—either to grow more rapidly or exit the business. In either event, 2024 should prove to be an interesting year.