ARKO Firms Up Growth Strategy With Oak Street Deal Extension
In aggregate, the company has more than $2 billion available for future merger-and-acquisition activity.
RICHMOND, Va. — ARKO Corp. is advancing its expansion plans through two new, separate agreements that enhance the company's dealmaking flexibility and long-term growth strategy.
On May 2, ARKO's subsidiary GPM Investments LLCentered into a third amendment to the program agreement with affiliates of Oak Street, a division of Blue Owl Capital. The amendment extends the term of the agreement and provides for an aggregate up to $1.5 billion of capacity from the date the amendment was signed through Sept. 30, 2024.
This $1.5 billion is in addition to the funding for the previously announced acquisition of WTG Fuels Holdings LLC, which is expected to close in the second quarter, the company said.
Additionally, ARKO subsidiary GPM Petroleum LP renewed and extended its revolving credit facility with a syndicate of banks led by Capital One, National Association. The credit line was increased by $300 million to $800 million, and its maturity was extended to May 2028.
In aggregate, ARKO currently has more than $2 billion in available capital for continued merger and acquisition activity, including cash, lines of credit and the extended Oak Street program agreement.
"We believe that these financial commitments position ARKO to continue our long-term growth strategy well into the future," said Arie Kotler, chairman, president, and CEO of ARKO. "I believe we have the balance sheet strength and liquidity to continue pursuing multiple paths of growth, making disciplined, accretive acquisitions while investing in our core convenience store business to create value for our stockholders."
GPM first announced its agreement with Chicago-based Oak Street Real Estate Capital LLC, under which GPM would own and operate the related acquired businesses while Oak Street would own the real estate and lease it to GPM, in spring 2021. The companies extended their agreement, providing aggregate availability in the amount of $1.15 billion for the second year of the term, in April 2022.
The partnership with Oak Street gives ARKO and GPM additional financial flexibility and purchasing power as well as the ability to be more aggressive with its mergers and acquisition strategy, Kotler previously noted.
The strategic move comes soon after Westlake, Ohio-based TravelCenters of America Inc. (TA) turned down ARKO's bid to acquire the company in favor of its previously announced deal BP. That $1.3 billion purchase of the travel center chain is slated to move forward this month, pending shareholder approval. Although ARKO offered a higher per-share purchase price, TA's board of directors unanimously recommended that shareholders support the deal with BP, citing a lack of committed financing as the critical deficiency of ARKO's offer.
Moving forward, ARKO plans to focus on making disciplined and accretive transactions that aid its continued ability to generate the majority of profits in-store.
"One of ARKO's core strengths is capital allocation, and we believe that opportunities for growth and expansion are the best use of our capital," Kotler said. "When looking at potential acquisitions, we always think through how we can add value and identify synergies that will enhance our investment."
Richmond-based ARKO Corp. owns 100 percent of GPM Investments and is one of the largest operators of convenience stores and wholesalers of fuel in the United States. 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 its fleet fueling sites.