By Erin Rigik, Associate Editor
Catterton Partners, a consumer-focused private equity firm, announced last week that it completed the sale of Mid-Atlantic Convenience Stores (MACS), a convenience store operator in Maryland and Virginia, to an affiliate of Sunoco Inc.
Since the deal was announced, two long-time industry observers weighed in with CSD on the deal and the ongoing merger and acquisition activity in the convenience store industry.
“This (acquisition) was initially a surprise to me—-especially given that the buyer was a retail group that bucked the trend of divesting retail like other retail companies; e.g., Murphy and Valero are the two that come to mind first,” noted David Bishop, managing partner, Balvor. “However, it’s important to remember that a private equity firm formed MACS via a series of acquisitions. And, given MACS achieved its current scale fairly quickly and had completed systems upgrades, the sale may have simply been in the best interest of the private equity group to optimize its investment. So, from the seller side, it was a good time to sell.”
Dick Meyer, president of Meyer & Associates noted the sale “looks like a great ROI in a relatively short period of time” for Catterton Partners. “It appears they packaged the company well by recruiting industry talents, including Pastor, Williams and Bassell, made a significant conversion to Circle K that enhanced per-site volumes and found a strategic buyer offering too good a price to turn down.”
Meyer noted the acquisition appears to be a strategic one for Sunoco.
“The major oil companies have consciously found ways to exit retail while retaining their core business related to fuel; that dynamic is not likely to change,” he noted. “Sunoco’s motivation appears to be about filling in the gaps where they already have distribution. As to the Circle Ks in-store sales, selling convenience store items is not major oil’s motivation. But if MACS had tremendous in-store sales results from the remodels they are probably also doing a stronger business in the forecourt. That’s oil companies’ primary motivation.”
As Sunoco plans for the future of its investment, Meyer suspects Sunoco will retain and probably grow the Circle K brand.
“It’s likely the Circle K arrangement has a minimum licensing term and post MACS’ substantial investment in these conversions and the apparent success from the change, I feel it’s very unlikely they’d be motivated to change away from Circle K. Further, if they did, I imagine it would cause major confusion for the consumer traffic that viewed them change to Circle K just a short time ago—and then change to another brand,” noted Meyer.
Major oil companies want to secure long-term fuel contracts with good convenience store operators, Meyer noted. “Sunoco’s latest deal makes you ponder ‘who’s next and when.’”
Boost for Sunoco
Sunoco, which has a long history in the retail business, with a network of almost 5,000 sites, will operate the MACS business.
Since investing in MACS in 2010, Catterton has helped it to become a leading development platform in the convenience store space. Over this period, MACS has been able to drive significant operational retail improvements at its convenience stores, including unifying store brands, enhancing store presentations, implementing merchandise resets and focusing on refreshments and foodservice.
These initiatives have resulted in same store sales growth of more than 46% over the last two years (excluding fuel).
“Our investment in MACS represents another successful strategic partnership for Catterton,” said Scott Dahnke, co-managing partner of Catterton Partners. MACS is now a leading convenience store operator in the Mid-Atlantic region, with an attractive portfolio of stores and strong retail offering. We are pleased to have participated in MACS’ success during our three years of ownership and believe it remains well-positioned for continued growth and success within the Sunoco organization.”
Based in Richmond, Va., Mid-Atlantic Convenience Stores has a network of approximately 300 company-owned and dealer locations. MACS is one of the largest fuel distributors in the region. The company is also the exclusive developer for the Circle K brand in Delaware, Maryland, Virginia and Washington, D.C. The company currently operates 71 locations in Virginia and Maryland, most of which are branded Circle K.
CSD learned that Sunoco is currently in the process of converting all of MACS BP-branded locations over to the Sunoco brand. “No branding decisions other than BP have been made yet—Sunoco and MACS leadership will work together to make the best decisions for the combined operations going forward,” noted Jeff Shields, communications manager, Sunoco Logistics / Sunoco Inc.