Mahalo Gas Station Sale OKd

FTC withdraws objection after throughput agreement

Published in CSP Daily News

HONOLULU -- The Federal Trade Commission (FTC) said late last week that, because of changed circumstances, it has asked the Federal District Court for the District of Hawaii to dismiss the commission's complaint seeking an injunction to block Aloha Petroleum Ltd.'s proposed $18 million acquisition of a half interest in an import-capable terminal and Mahalo retail gas stations and assets of Trustreet Properties Inc. on the island of Oahu, Hawaii.

FTC filed its unanimous motion after Aloha announced it would enter into a 20-year throughput agreement giving [image-nocss] Mid Pac Petroleum LLC substantial rights to use the Barbers Point terminal. The agreement will restore competition threatened by the acquisition.

This is a clear victory for consumers in Hawaii, said Susan Creighton, Director of the FTC's Bureau of Competition. Through this agreement, Mid Pac will become a significant competitor in the marketing of bulk supply gasoline on Oahu. Accordingly, she said, the commission has decided not to pursue further litigation in this case.

Aloha's 20-year throughput agreement with Mid Pac will essentially substitute Mid Pac for Trustreet as a bulk supply gasoline marketer in Hawaii. Mid Pac owns and operates several retail gasoline stations in Hawaii under the Union 76 brand. Mid Pac also supplies gasoline to several other Union 76 stations owned by third parties.

The throughput agreement gives substantial rights to Mid Pac to use the terminal to import virtually unlimited quantities of gasoline into Hawaii.

Aloha already owns a 50% interest in the Barbers Point petroleum importing terminal on Oahu and under the transaction as proposed would have acquired the other half interest from Trustreet. The terminal is the newest on the island and it can take full cargoes of gasoline, which is the most economical way to bring in low-cost bulk supply to Hawaii.

The FTC's complaint alleged that the ability to import cargoes of gasoline is necessary to obtain a competitive bulk supply price from one of the two refiners on Oahu, Chevron Corp. and Tesoro Corp. As co-owners of the Barbers Point Terminal, both Aloha and Trustreet therefore had the ability to market gasoline competitively in Hawaii. The only other terminal available for gasoline imports is the Shell terminal.

Consequently, the complaint stated that, if the acquisition were allowed to proceed, it would reduce the number of gasoline marketers with ownership of, or guaranteed access to, a refinery or an import-capable terminal from five to four. It would also reduce from three to two the number of bulk suppliers who have been willing to sell to unintegrated retailers. The acquisition would thus be likely to result in higher prices for bulk supply of gasoline.

In an interview with Pacific Business News, Aloha President Bob Maynard said most of the stations will be renamed Aloha, adding to the company's existing 60 locations on Oahu and the Big Island. "We will bring most of the stations under Aloha's brand name, and improve their appearance and functionality," Maynard told the newspaper. "Most of the convenience stores will take Aloha's own Island Mini-Mart brand, with seven of them remaining under the 7-Eleven brand."

With the acquisition Aloha hopes to consolidate itself in the increasingly competitive retail gasoline market, said the report. "It also strengthens our position as a local company competing against the national and international petroleum companies operating in Hawaii," Maynard said.