Speedway Set to Get $925M Capital Infusion for Growth

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Speedway Set to Get $925M Capital Infusion for Growth

By Melissa Kress, Convenience Store News - 12/04/2013

FINDLAY, Ohio -- It has been more than two years since Marathon Petroleum Corp. (MPC) was formed as an independent entity. During that time, the company’s retail division has been positioning itself to expand its reach -- and now, the time has come.

During its 2013 Analyst & Investor Day today, MPC President and CEO Gary Heminger said the Findlay-based company will be allocating capital in the future to drive growth in businesses with more stable cash flow and higher value. Its retail division, Speedway LLC, is one such business.

Speedway will grow in existing and contiguous markets through both organic growth and selective acquisitions, he added.

MPC will spend $925 million over the next three years growing Speedway, explained Don Templin, senior vice president and chief financial officer of MPC.

Retail growth, in addition to midstream assets, will comprise a significant amount of the company's capital investment. In fact, over the next three years, Marathon Petroleum will spend $2.4 billion more on retail and midstream growth than it did in the past three years, according to Templin.

Looking at Speedway's numbers, the division is on pace to hit 3.2 billion gallons of gasoline and diesel this year, while merchandise sales are on pace to reach $3.2 billion, noted Tony Kenney, president of Speedway LLC. From 2011 to 2013, two-thirds of Speedway's sales have come from inside the stores.

"Consumers continue to show a preference to shop in convenience stores," Kenney said, adding that in this highly fragmented industry, small operators are under pressure and could offer an attractive opportunity for Speedway.

Speedway has identified 280 "fill-in" opportunities for organic growth in its existing markets, with the Chicago, Indianapolis and Louisville areas tapped as key growth markets. In addition, the company has identified 230 existing stores as candidates for rebuilds, Kenney detailed.

As for new growth, the retailer's expansion in contiguous markets like western Pennsylvania and Tennessee is well underway. Key areas include Pittsburgh, and Nashville, Knoxville and Chattanooga in Tennessee.

Kenney acknowledged that the company is evaluating additional markets, but he did not name those markets.

Pointing to Speedway's organizational infrastructure and technology platform, he said the company is in a great position to move forward. "I am bullish on the future of the convenience store industry and especially Speedway," he said.