By Erin Rigik, Senior Editor
As Convenience Store Decisions first reported in yesterday’s daily news, Flash Foods is in talks with a potential suitor about a possible acquisition.
“The Jones Company, who is the holding company for Flash Foods, is exploring a potential sale at this time but (the) sale may or may not happen,” Flash Foods CEO Jimmy Jones told CSD.
Flash Foods, based in Waycross, Ga., currently operates 173 stores in Georgia and Florida.
Industry analyst David Bishop, managing partner for retailing consultancy, Balvor LLC, based in Barrington, Ill., said Flash Foods is an attractive acquisition target both because of its reputation as being an outstanding marketer and its retail footprint.
“There are a variety of reasons why other companies would value Flash Foods as an acquisition, for example, its excellence in technology and its use of technology to drive the retail business. Secondly, it has a strong and sizeable regional store base, which would add to anyone chain’s network and help leverage cost of goods either on the fuel side of the business or the store side of the business,” Bishop told CSD.
The convenience store industry is going through a consolidation phase, party driven by extremely low, artificially-driven interest rates. As a result, sellers are benefiting nicely from high EBITDA multiples. Just over the past couple of years, iconic family-owned convenience store brands such as Nice N Easy and Tedeschi Food Marts have been sold to larger corporations, CST Brands and 7-Eleven respectively. There is little reason to believe this trend won’t continue as these larger companies remain on the prowl for regional powerhouses to continue building their national footprint.
“From the seller’s perspective—if you look at sellers being sold—they’re getting a strong premium or multiple for their sales. If it’s buy low and sell high, sellers in the market are in a market where they can sell high. So financial markets are favoring those prepared and willing to sell,” Bishop said.
Who Is The Mystery Suitor?
As for who the mystery suitor might be, Bishop declined to speculate. He noted there are likely many horses in the race, and that most retailers in the industry could probably pick 2-3 potential suitors pretty easily.
In the industry, speculation abounds.
One potential suitor might be CST Brands Inc., which has shown aggressive expansion into new geographic areas. It enjoys flexibility through its master limited partnership (MLP) component via CrossAmerica Partners LLP, and therefore has the capital resources to pull of such an acquisition. It is noteworthy that CST Brands Inc. just announced that the independent executive committee of its board of directors has approved a purchase program authorizing CST Brands and its subsidiaries to purchase up to an aggregate of $50 million of common units representing limited partner interests in CrossAmerica Partners LP.
A CST Brands spokesperson told CSD that the convenience retailer doesn’t comment on potential acquisitions.
When asked how CST Brand might benefit from an acquisition of Flash Foods, Bishop noted, “With previous acquisitions, Nice N Easy for instance, CST has demonstrated a desire not only to acquire strong regional brands and bring them into its network, but also a desire to integrate learnings, skills and talents from that acquiring company. If you look at some of the leadership of Nice N Easy in the past, before the acquisition, they are leading some of the initiatives of CST more broadly. So if they are looking at Flash Foods, it may be in a similar way, but focused more on the technology side.”
Like with CST Brand’s Nice N Easy acquisition, there would be no overlapping market coverage in the Georgia and Florida markets, where it currently does not have any operations.
Couche-Tard, which has been known to aggressively seek out acquisitions, just announced it is unifying its brands under a global Circle K brand. Adding Flash Foods to the family would solidify its operations in the Southeast.
Couche-Tard has demonstrated both in action and in word that part of its investment strategy is to maximize value for its shareholders. It has been demonstrated in how it has integrated its acquisitions and learned from those acquisitions to strengthen its own offer,” Bishop said.
“The value of Flash Foods to Couche-Tard would be an established based of more than 170 locations it could add to its network both on the fuel and store side that would lower its cost of doing business, allowing it to be more competitive on key prices. It could also could benefit through the adoption of some of the best in class technological practices of Flash Foods to drive efficiencies throughout its entire network, and it could rebrand Flash Foods to reinforce its existing Circle K banner,” he added.
7-Eleven is another industry behemoth that has been hungry for acquisitions and could find comparable benefits in Flash Foods as it saw in Tedeschi Food Shops, which it acquired earlier this year. Like Flash Foods, Tedeschi was strong regional company-owned and company-operated c-store chain with a sizeable store base at 182 stores—similar in size to Flash Foods’ 173 locations.
“The value of Flash Foods to 7-Eleven would be to help it strategically strengthen its ability to pursue emerging product service offerings that they are currently pursuing with strategic partners for alternative routes to market (for example, its direct delivery initiatives),” Bishop said.
7-Eleven is looking to continue to expand its presence in the U.S. and it is really the only true national player—although most of its stores are franchise operations—adding appealing partners it can collaborate with could add more appeal to its franchise base. Having a national presence allows it to further pursue these alternative routes to market, noted Bishop.
Only time will tell who the true suitor may be. Stay tuned to CSD for more on this developing story.