CrossAmerica Puts Asset Deals at Top of 2020 Strategy

ALLENTOWN, Pa. — CrossAmerica Partners LP had a busy 2019, and the partnership expects to have its hands just as full in 2020.

Recounting CrossAmerica's 2019 highlights during its fourth quarter and full year 2019 earnings call, held Feb. 26, President and CEO Charles Nifong touted its closing of the first two tranches of an asset exchange pact with Alimentation Couche-Tard Inc. as well as the sale of its general partner to CrossAmerica founder and Chairman Joe Topper.

CrossAmerica and Couche-Tard closed the first swap on May 22 and the second on Sept. 5 for a total of 116 sites. Those sites are now dealerized and part of CrossAmerica's wholesale segment, according to Nifong, who rejoined the partnership in November.

The original December 2018 asset exchange agreement with Couche-Tard called for CrossAmerica to receive 192 company-operated convenience and retail fuel stores in the United States. Of the sites, 162 are fee-based and 30 are leased. The transaction is valued at $184.5 million, as Convenience Store News previously reported.

For its part, Couche-Tard is set to receive the real estate property for 56 U.S. company-operated convenience and retail fuel stores currently leased and operated by Couche-Tard/Circle K. The fuel supply agreement to these sites — which are part of CrossAmerica's wholesale segment — will remain unchanged. In addition, Couche-Tard/Circle K is set to receive 17 company-operated stores in the upper Midwest region of the U.S. Fourteen of the sites are fee-based and three are leased.

At the top of CrossAmerica's to-do list for 2020 is closing the final tranche of the asset exchange pact, consisting of 76 sites.

"Based on our current timeline, we expect the remaining sites to be dealerized and the final asset exchange to be completed by the first quarter or early second quarter of 2020," Nifong reported. "While we have previously noted that we expect to complete the remaining exchanges by the first quarter, some of the exchange transactions may move into the early part of the second quarter due to the timing of the program."

CrossAmerica's 2020 agenda also includes wrapping up another previously announced deal: an exchange of U.S. wholesale fuel supply contracts from Couche-Tard to CrossAmerica with a 17.5-percent limited partner interest in CST Fuel Supply.

The partnership expects to close that transaction by the end of the first quarter.

New Year, New Moves

In addition to the asset exchange agreements, CrossAmerica kicked off 2020 by reaching a deal with entities affiliated with Topper to acquire the retail operations at 172 sites, wholesale fuel distribution to 114 sites (including 55 third-party wholesale dealer contracts), and a leasehold interest in at least 53 sites. The deal is on track to close in the second quarter of 2020.

"We continue to expect to complete this transaction sometime during the second quarter of 2020. With this transaction, we will not only be adding wholesale fuel contracts to our portfolio, but we'll be adding retail assets and retail capability that will enable the partnership to pursue a broader range of acquisition opportunities, and provides greater flexibility for optimizing across the trade for each asset in our current portfolio," Nifong explained.

The next step will be integration. "Once we have completed the asset exchanges and acquisition … our focus will be to make sure that these assets are transitioned and integrated in our business units efficiently and that the assets are positioned for the future," the CEO added.

CrossAmerica will follow this with an overall review its real estate portfolio to determine if there are properties that may no longer meet the partnership's needs or are not assets it wants to hold onto long term.

"This is an initiative that will continue on throughout this year as the real estate portfolio has not been reviewed with this focus in several years," Nifong said, adding that CrossAmerica also will continue to focus on fuel synergies and optimizing its relationships with fuel suppliers and the number of brands it offers.

As for future merger and acquisition (M&A) activity, Nifong said CrossAmerica looks at potential deals in the M&A market; however, its focus is "on making sure that we close these acquisitions and integrate them effectively into the organization."

Allentown-based CrossAmerica is a distributor of branded and unbranded petroleum for motor vehicles in the United States and distributes fuel to approximately 1,300 locations and owns or leases more than 1,000 sites. With a geographic footprint covering 31 states, it has relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66.