RICHMOND, Va. — GPM Investments LLC reached a deal to acquire approximately 150 convenience stores from Transit Energy Group (TEG).
The agreement also includes fuel supply rights to approximately 200 dealers, commercial, government, and industrial customers, as well as TEG's bulk storage, distribution and transportation assets, all in the southeastern United States.
With the transaction, GPM expands its retail footprint to Alabama and Mississippi.
GPM is a wholly owned subsidiary of ARKO Corp. The acquisition is part of ARKO's strategic focus on growth and generating long-term stockholder value with its convenience, wholesale, and fleet fueling platform.
"We believe this significant, accretive acquisition will drive strategic growth with the addition of an exceptional team, well-known stores and other assets to our Family of Community Brands," said Arie Kotler, president, chairman and CEO of ARKO.
"A deal of this magnitude complements our core capabilities and will create long-term value for ARKO stockholders and valuable synergies given our existing footprint and proven strategy of adding value to strong local brands while keeping jobs in place," he added.
Greenville, S.C.-based TEG, currently owned by ECP, is a privately held convenience store and wholesale fuel company in the southeast United States. TEG has its own growth pipeline and a record of growth in Alabama, Arkansas, Louisiana, Mississippi, Missouri, North Carolina, South Carolina and Tennessee, operating under the Flash Market banner and several other brands.
This acquisition is expected to increase ARKO's store count to more than 1,530 convenience stores and expand the company's wholesale segment to more than 1,800 sites.
Including retail and wholesale it is expected that the acquisition will add approximately 285 million gallons of fuel, the majority branded, to the approximately 2 billion gallons the company currently sells annually, according to ARKO.
"ARKO will add value to our stores with their diverse offerings, and 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 and company are joining a growing and dynamic organization."
The purchase price is approximately $375 million plus the value of inventory, of which $50 million is deferred and payable in two annual payments of $25 million, which ARKO may elect to pay in either cash or, subject to certain conditions, shares of ARKO's common stock, on the first and second anniversaries of the closing.
At closing, ARKO intends to finance from its own sources approximately $60 million of the cash consideration plus the value of inventory and other closing adjustments. The remaining approximately $265 million is expected to be funded by Oak Street Real Estate Capital, a division of Blue Owl Capital Oak Street, as part of the previously announced existing $1.15 billion agreement with the ARKO.
Under that pact, Oak Street is expected to acquire the real estate assets to be acquired from TEG as part of the transaction and the ARKO expects to lease the real estate assets from Oak Street.
Using estimated forward-looking non-GAAP measures, the ARKO expects that this acquisition will add approximately $18 million of adjusted EBITDA on an annualized basis, which is expected to be $27 million on an annual run rate including synergies, after incremental rent of approximately $16 million to be paid to Oak Street for the aforementioned lease.
The closing of the transaction is subject to fulfillment of conditions precedent. There is no certainty that the transaction will close. BofA Securities Inc. is acting as exclusive financial advisor to Transit Energy Group and Nelson Mullins Riley & Scarborough LLP and Latham & Watkins LLP are acting as legal counsel. Greenberg Traurig P.A. and the law firm of Schwarz and L'Altrelli are acting as legal counsel to ARKO.
"Over the course of our ownership, ECP is proud of the progress that our partnership with the TEG team has made in building a high-quality portfolio of retail and wholesale assets across the southeastern United States. I would like to thank the entire TEG team for their efforts and commitment over these past few years, and I look forward to their continued success as part of the ARKO family," said Rahman D'Argenio, partner at ECP.
Richmond-based ARKO Corp. is a Fortune 500 company that 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; wholesale; GPM Petroleum, which sells and supplies fuel to ARKO's retail and wholesale sites; and fleet fueling, which operates proprietary cardlock locations, manages third-party cardlock locations, and markets fuel cards that give customers access to a nationwide network of fueling sites.