Halfway There

ConocoPhillips closes on sale of about half its retail sites to Pacific Convenience & Fuels

Published in CSP Daily News

By  Linda Abu-Shalback Zid, Senior Editor

[Editor's Note: This article is the fourth in an ongoing series on how the recession is affecting the c-store landscape. This piece focuses on recent activity in the West and West Central regions of the United States.] KENT, Wash. -- The ball is rolling on ConocoPhillips' deal to divest its remaining 830 retail sites, with about half of them having changed hands at the end of January, according to sources.

Pacific Convenience & Fuels LLC, an affiliate of Kent, Wash.-based PetroSun West, closed on 330 company-operated sites and a number of dealer-operated sites [image-nocss] on Friday, Jan. 30, according to Kelvin Covington, manager of programs at Houston-based ConocoPhillips. Closing on the remaining sites is expected to occur later this year. Covington could not offer a more definitive date. The entire package cost approximately $800 million.

A simultaneous deal with Littleton, Colo.-based K&G Petroleum LLC also has been completed, as confirmed by Darby Tucker, business development manager for K&G. Although details of the deal were not readily available, CSP Daily News previously reported that K&G planned to more than double its size by purchasing 92 of the sites from Pacific Convenience. K&G approached Pacific about making the simultaneous deal after its own offer to ConocoPhillips lost out to the Pacific package.

As for the ConocoPhillips/Pacific deal, it is unclear why the Jan. 30 closing was only on some of the locations outlined in the deal, and this a month and a half after the original closing of Dec. 15 set back in August. Attempts to contact Pacific Convenience & Fuels for comment were unsuccessful.

One reason might be the lack of right-of-first-refusal offers for dealer-operated sites in California and Washington, according to Tim Hamilton, executive director of the Automotive United Trades Organization, McCleary, Wash. In those states, Hamilton said, the current dealer must be offered the opportunity to purchase the sites at the same price offered to Pacific.

Many dealers are unhappy with the deal due to the current economic downturn, "because they don't want to buy these themselves and want to stay in business, or they lost their financing," he said. As CSP magazine reports in its February cover issue, many deals are not getting done because of the lack of available credit. "With the credit crunch that came down, many of them who used to have financing lost their financing," Hamilton said.

To view a complete summary of recent merger-and-acquisition news from the West and West Central regional, click the "Download Now" button below. A few highlights:

A 7-Eleven spokesperson said the company will continue to look at acquisitions for growth, with a mission: "We want to grow where we already have a concentration of stores that are supported by our system of daily distribution of fresh foods," Margaret Chabris said. The Los Angeles area is a particular hotspot for the company, because of "population, people on the go, strong infrastructure of daily delivery."

Mike Rud, president of the North Dakota Petroleum Marketers Association, said the state has seen "quite a few" mergers and acquisitions over the last couple of years. He added that it seemed to have "nothing to do with the financial meltdown" and attributed it to attrition, as family members get older and get out of the business. He said the majority of the local businesses are now independents. "We saw BP has left North Dakota completely. Conoco has held onto only some sections of the state, because they can't guarantee supply."

Tim Keigher, executive director of the Nebraska Petroleum Markets & Convenience Store Association, said he has seen quite a bit of M&A activity over the past five years. "Just like every other type of company out there in the world, you can no longer operate a business unless you grow it." Although Keigher said there aren't necessarily any areas of Nebraska that are hotter than others, he added, "More rural members are doing more consolidating.
Those were members who did less gallonage. Unless you were on the interstate, business is shrinking, because people are leaving the rural areas."

In addition, Dennis Ruben, managing director of Chicago-based NRC Realty Advisors, said, "West Coast real estate is attractive for sale-and-leaseback-buying sites. There's a dense population and a strong barrier to entry-there's a monopoly and it's difficult to get zoned. If you have established stores, you know there's a high barrier to entry for new markets."

For a more insights on the changing c-store merger-and-acquisition landscape and to view CSP's exclusive countdown of the nation's Top 10 Changing Markets, watch for the February issue of CSP magazine.

Keywords: 
M&A