The Pantry Pulls Back

Venerable c-store chain continue to lay low on acquisition opportunities

Published in CSP Daily News

By
Linda Abu-Shalback Zid, Senior Editor

[Editor's Note: This article, a focus on recent M&A activity in the South and Southeast regions, is the final entry in an ongoing series on how the recession is affecting the c-store landscape.] SANFORD, N.C. -- It looks as though The Pantry has once again put its acquisition plans on the back burner. In a first-quarter earnings call with analysts last week, the company reported that it did not make any acquisitions in the first quarter. Berry Epley, the company's vice president and corporate controller said, "We don't plan acquisitions; we'll look at that opportunistically."[image-nocss]

Previously, in May 2008, the company had completely halted acquisition activity when Peter Sodini, chairman and chief executive officer of the Sanford, N.C.-based company, said that due to still-soaring crude-oil prices and the existing soft economy, the company was "suspending any additional activity for the remainder of this calendar year."

But in November 2008, the company seemed ready to join the acquisition game once again.

"The retail environment clearly remains challenging, but with our ample liquidity and improved profitability, we believe we are well positioned to again consider strategic 'tuck-in' acquisitions in our regional markets that we believe will be accretive for our shareholders," Sodini said at the time. And a research note published in December by Mark Miller, analyst at William Blair & Co., said that "smaller deals appear more likely and this may still allow further deleveraging [of debt]."

The Pantry's M&A activity over the past decade has stretched the chain's market from North Carolina to northern Virginia, southern Florida and Shreveport, La.

CFO Frank Paci said in a Morgan Keegan 2008 Equity Conference in September that the company has "heavy concentrations" of stores in north Florida, North Carolina, South Carolina, Alabama and Tennessee. "Even though we have high concentrations of stores in these markets, we have a relatively low share in those markets, and more than 50% of all those stores are operated by single-store operators," he said. "So we believe there are still significant opportunities for consolidation within our geography."

But that likely will wait until the timing is right. According to Epley, "Right now we're not planning a lot of new stores, depending on what happens in the market and what's available from an acquisition standpoint."

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

Steve DeSutter, president and CEO of Stripes, the retail brand for Corpus Christi, Texas-based Susser Holdings Co., told CSP in December: "We are well-positioned to move forward when the right opportunity and the right situation comes along. Our sweet spot continues to be in Texas and the surrounding areas." DeSutter said this will allow the company to maintain efficiencies around management, distribution and other common resources. And there's another reason: "Those markets have demonstrated some of the strongest economic growth, and will likely continue to do so," he said.

Florida has seen a lot of acquisitions, due to big-oil divestment, according to Jim Smith, president and CEO of the Florida Petroleum Marketers & Convenience Store Association. Also, the fact that Florida is a growth state "bodes well for anyone who wants to expand their footprint in-state," he said, adding that the concentration of acquisitions are in southeast, central (Orlando), and west central (Tampa) Florida. The six largest counties in Florida are included in those areas.

In a Nov. 12, 2008, filing with the Securities & Exchange Commission, Alon Brands Inc. (which was established as a subsidiary of Alon USA in November, with the intent of spinning it off as a public company) prepared for an initial public offering of stock, with the aim of raising perhaps as much as $100 million. In the filing, Alon noted that its "acquisition experience and [its] scalable infrastructure form a strong platform for future growth and that acquisitions of additional stores provide [Alon] the opportunity to increase [its] overall profitability." The filing also noted that the company expected to continue to grow its retail store base through acquisitions in markets where it is the exclusive licensee of the 7-Eleven brand. "Texas and New Mexico are our primary markets," Kyle McKeen, president and CEO of Alon Brands told CSP in December.

For a PowerPoint of reported M&A activity in the South and Southeast, click the Download Now icon below. And for an in-depth exploration of the buying-and-selling climate emerging as a result of today's economic downturn, look to CSP magazine's February cover story. Also, click here to check out CSP's new and exclusive interactive map that catalogs reported merger-and-acquisition activity by region.

Keywords: 
M&A