ARKO Closes $370M Deal for Transit Energy Group's Assets
RICHMOND, Va. — ARKO Corp. sealed its 23rd acquisition since 2013.
The parent company of GPM Investments LLC completed its $370 million purchase of the assets of Transit Energy Group (TEG) and its affiliates. The transaction comprises approximately 135 convenience stores, fuel supply to approximately 190 independent dealers, and a transportation business with 58 trucks and 78 tanker trailers that support the retail and wholesale business.
This acquisition expands ARKO's retail store base into Alabama and Mississippi.
Greenville, S.C.-based TEG is one of the largest privately held portfolios in the Southeast, with well-known banners including Corner Mart, Dixie Mart, Flash Market, Market Express and Rose Mart. The retail segment is comprised of approximately 135 company-operated convenience stores throughout South Carolina, North Carolina, Tennessee, Mississippi, Missouri, Louisiana, Alabama and Arkansas.
"ARKO's demonstrated history of growing adjusted EBITDA and cash flow by executing the company's long-term growth strategy, which is enhanced by our integration capacity and ability to add value to newly acquired stores with our merchandising and marketing, is what sets us apart as a convenience retailer," said Arie Kotler, chairman, president and CEO of ARKO.
"We believe we can add value to these stores and well-known regional brands with an enhanced offering as we reset these stores. We welcome TEG's employees to our Family of Community Brands and look forward to working together to grow the business and provide value for customers," he added.
Since 2013, ARKO's growth strategy has significantly increased the company's cash flow and adjusted EBITDA, transforming the business from approximately 200 stores in seven states into one of the largest c-store operators in the United States with more than 1,500 company-operated sites.
Its integration capacity, coupled with its strength in merchandising and marketing, has consistently created compelling returns on invested capital and increased store-level adjusted EBITDA, according to ARKO.
"ARKO has a proven ability to add value to stores with their diverse offerings and will ably serve our many loyal retail and wholesale customers," said Stephen Lattig, president and CEO of TEG. "TEG would not be the success it is today if it were not for the dedication of its team members. We are excited that our team members are joining a growing and dynamic organization like ARKO."
Financing Details
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. ARKO may elect to pay the two annual payments in either cash or, subject to certain conditions, shares of ARKO's common stock.
ARKO financed from its own sources approximately $90 million of the nondeferred consideration including the value of inventory and other closing adjustments. The remaining approximately $258 million was funded by funds managed by Oak Street, a division of Blue Owl Capital, as part of the existing $1.15 billion agreement between the company and Oak Street. Under the agreement, Oak Street acquired the majority of the real estate assets of TEG substantially concurrently with the closing of the transaction. ARKO now leases these real estate assets from Oak Street.
Transaction Assets
According to ARKO, the acquired brands have decades of continuous operations. Many TEG c-stores include well-known food offerings, such as Baskin-Robbins, Chester's Chicken, Pizza Inn and Subway franchises.
The acquisition also includes a network of approximately 190 independent dealer locations, expanding the company's wholesale segment to more than 1,850 sites. Including retail and wholesale, it is expected that the acquisition will add approximately 285 million gallons of diesel and gasoline, the majority branded, to the approximately 2 billion gallons the company currently sells annually.
BofA Securities Inc. acted as exclusive financial advisor to Transit Energy Group and Nelson Mullins Riley & Scarborough LLP and Latham & Watkins LLP, and Harriton & Furrer LLP acted as legal counsel. Greenberg Traurig P.A. and the law firm of Schwarz and L'Altrelli acted as legal counsel to ARKO.
Richmond-based ARKO Corp. owns 100 percent of GPM Investments LLC and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. Its brands offer prepared foods, beer, snacks, candy, hot and cold beverages, and multiple quick-service restaurant brands.
It operates in four reportable segments: retail, which includes convenience stores selling merchandise and fuel products to retail customers; wholesale, which supplies fuel to independent dealers and consignment agents; fleet fueling, which includes the operation of proprietary and third-party cardlock locations, and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites; and GPM Petroleum, which sells and supplies fuel to our retail and wholesale sites and charges a fixed fee, primarily to our fleet fueling sites.