The UK retailer is making fast inroads into the U.S. convenience channel with its latest acquisition.
After a $2.15 billion acquisition of Kroger’s convenience store business earlier this year, EG Group is purchasing the Minit Mart sites from TravelCenters of America (TA) for more than $300 million.
EG Group is a privately-held petroleum forecourt convenience store retailer based in Blackburn, Lancashire, United Kingdom.
The Blackburn-based EG Group is continuing its expansion across the U.S. with the acquisition of 225 Minit Mart-branded convenience stores and fuel stations. It operates across nine Midwest US states and employs a workforce of about 2,500.
The deal means a big move from the convenience side of the house for TA.
Andy Rebholz, TravelCenters’ Chief Executive Officer, qualified today’s announcement:
“When the sale of this business is completed, TA will exit the standalone convenience store business, allowing us to increase our focus on our core travel center operation, which we believe is a business where we have many competitive advantages,” Rebholz said in a prepared statement. “We plan to use the net proceeds from this sale to reduce leverage and/or invest in travel center growth initiatives. We expect some of these growth initiatives may include expanding our industry leading truck service program and growing our nationwide network of travel centers, including investing in our recently announced TA Express travel center format and pursuing new franchising opportunities.”
“Our standalone convenience stores have been a part of our business for nearly five years,” he concluded. “We want to thank our corporate and field employees for their hard work and commitment to our customers throughout the period we have operated these convenience stores.”
The portfolio TA has agreed to sell generated earnings before interest, taxes, depreciation and amortization, or EBITDA, of approximately $24.5 million during the 12 months ended June 30, 2018. This EBITDA amount includes selling, general and administrative expenses that are directly associated with the portfolio of approximately $10.2 million for the 12 months ended June 30, 2018; TA believes it will eliminate this amount of annual expenses upon the closing of this transaction.
A reconciliation of EBITDA generated by the portfolio to be sold to TA’s convenience store segment site level gross margin in excess of site level operating expenses, the most comparable financial measure prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for the 12 months ended June 30, 2018, appears later in this press release. The site level gross margin in excess of site level operating expenses of TA’s convenience store segment for the 12 months ended June 30, 2018, was $39.9 million.
Based on a total sale price of $330.8 million, TA expects to recognize an impairment charge of approximately $101.5 million in the third quarter of 2018 to recognize the convenience store business as held for sale and a discontinued operation. Based on this total sale price and the estimated expenses related to the transaction,
TA also expects that the net cash proceeds from this transaction will be approximately $320.1 million. The $330.8 million total sale price includes $25.8 million of estimated net working capital items that are based on balances as of June 30, 2018, that are subject to adjustment based on the actual balances of these items at or near closing, and any change to this estimated net working capital amount will affect the net cash proceeds TA receives from this transaction.
The transaction is subject to customary closing conditions.
Citigroup Global Markets Inc. is acting as exclusive financial advisor to TA in this transaction. Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor to TA in this transaction.
Mohsin Issa, founder and co-CEO, EG Group, told the Lancashire Business Review: “We have a firm commitment to growing our presence in the USA, the world’s largest convenience market, and are extremely pleased to have signed definitive transaction documents to acquire the Minit Mart network from TravelCenters. The Minit Mart portfolio will be a strong addition to our business.”
Zuber Issa, founder and co-CEO, EG Group, added: “For the past 17 years, we have had a vision of becoming a leading gas station/convenience store operator around the world. This is another exciting international milestone on our growth journey.
“The Minit Mart acquisition will underpin a more sustainable network, allow us to explore further real estate development prospects and more importantly provide further growth opportunities in the USA for all our colleagues.”
Legal advisors to EG Group are Eversheds Sutherland LLP (M&A) and Kirkland & Ellis LLP (Banking & Finance). Barclays Bank plc acted as M&A advisers to EG Group underwriting the debt financing for the deal.
TravelCenters, headquartered in Westlake, Ohio, offers diesel and gasoline fueling, restaurants, truck repair facilities, convenience stores and other services in 43 states and in Canada, principally under the TA and Petro Stopping Centers travel center brands.