Insider's View: M&A Market Just Beginning to Pick Up

Two blockbuster acquisitions lead capital-markets review of Q2 2014

Published in CSP Daily News

By  Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC

Growth Initiatives

  • Cumberland Farms is continuing to grow its presence in Florida after reducing its store count in New Jersey, Delaware and Pennsylvania following the sale of 27 stores in those states. The company plans to expand its presence in the Fort Lauderdale-to-Melbourne, Fla. corridor. Six stores are under construction and in the pipeline at the present time.
  • Tesoro Corp. announced that it expects to close on the acquisition of 15 retail convenience stores and gas stations in the Salt Lake City area. The stations will carry the Exxon fuel brand.
  • Supermarket chain Hy-Vee Inc., based in West Des Moines, Iowa, announced that it plans to open 16 convenience stores by the end of the company’s fiscal year. The company already operates 120 Hy-Vee Gas convenience stores with fuel in the parking lots of its grocery stores.
  • Casey’s General Stores Inc. reported that during its current fiscal year, it has built 44 new convenience stores, acquired 28 stores and completed 20 replacements, as well as 25 major remodels. The company currently has 27 new stores and 23 replacement stores under construction, as well as 38 new sites, 28 replacement sites and five acquisition stores under contract to purchase.

Conclusion

Based on the large transactions announced during the second quarter, and the United Oil deal that was closed just after the end of the quarter, the year seems to be getting off to a good start in terms of merger-and-acquisition activity.

We are aware of a number of transactions—of all sizes—that are in the pipeline at the moment and should close this year. In addition, we are aware of some other divestitures of nonstrategic assets by major industry players that will be commenced shortly.

The access to capital by the larger players, the low-interest-rate environment and the tax-advantaged MLP structure all explain the incredible pace of acquisitions we are witnessing at present. There are no signs on the horizon that this trend is slowing any time soon; in fact, it may be picking up pace as companies attempt to complete transactions before the end of the year.

Furthermore, with the high multiples being paid for quality assets and companies, owners and operators who have previously not seriously considered selling their companies are now exploring their options.

The remainder of the year should prove interesting when we look back and see where things started in January and where they wind up in December. Stay tuned!

Part of CSP's 2014 Convenience Top 101 retailers

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By Dennis L. Ruben, Executive Managing Director, NRC Realty & Capital Advisors LLC
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