Haymaker Acquisition Corp., a publicly traded special purpose acquisition company, ARKO Holdings Ltd. (Arko), an Israeli public holding company and GPM Investments LLC (GPM), announced that they have entered into a letter of intent for a business combination — a transaction at approximately $1.5 billion in enterprise value.
The business combination would result in 100% of both GPM and Arko combining with Haymaker with substantial rollover from existing equity holders. Currently, Arko owns 68% of GPM, and the remaining 32% is held by Davidson Kempner Capital Management LP, funds managed by Ares Management Corporation, and Harvest Partners SCF LP.
Based in Richmond, Va., GPM founded in 2003 with 169 stores and has, since control was acquired by Arko in 2011, grown through acquisition to operate 1,400 locations in 23 states comprised of 1,272 company-operated stores and 128 additional sites to which it delivers fuel.
GPM is the 7th largest convenience store chain in the U.S. The company operates in three segments: retail, which consists of fuel and merchandise sales to retail consumers; wholesale, which supplies fuel to third-party dealers and consignment agents; and GPM Petroleum, which supplies fuel to Company stores as well as independent operators and bulk purchasers.
“I am very excited about this combination,” said Arie Kotler, CEO of Arko and GPM. “We have a demonstrated history of profitable growth and a track record of executing consolidation opportunities. Combining with Haymaker as a Nasdaq-listed, pure-play operator of convenience stores greatly enhances our ability to execute our growth strategy in a large, growing, recession resistant industry, while driving value for our combined shareholders.”
“The proposed transaction with Arko and GPM meets all of the strategic criteria we developed for Haymaker,” said Steven Heyer, CEO and Executive Chairman of Haymaker. “This is a sizeable transaction at approximately $1.5 billion in enterprise value, with a business that has scale, geographic diversity and significant growth opportunities, led by Arie and a strong management team with public market experience. We intend to continue growing the GPM platform and to pursue strategic initiatives jointly with Arie, a proven consolidator and operator. The structure of the proposed business combination is also appealing. We expect long-term institutional investors and management to roll over significant equity at an attractive valuation relative to U.S.-listed peers.”
Highlights of the proposed transaction:
- GPM has grown through acquisition to become the 7th largest convenience store chain in the U.S., with 1,272 company-operated locations, excluding pending acquisitions, in 23 states. The company has increased its store count approximately 4.4x over the past seven years.
- The company projects its EBITDA will have grown at a 28%-29% compound annual growth rate (CAGR) from 2016 through 2020E.
- The convenience store industry has demonstrated long-term growth yet remains highly fragmented. The industry has grown at a 3.4% CAGR since 2007 (per NACS State of the Industry Report). The top ten companies control less than 20% of the store base in the U.S., providing significant opportunities for future growth.
- GPM’s growth has accelerated in more recent months during the COVID-19 pandemic as consumers shift shopping patterns to convenience stores from other channels. The company will also benefit substantially if travel patterns in the U.S. shift from flying to driving. Furthermore, the convenience store channel experienced growing sales in the recessionary period of 2008-2009.
- The combined company will be led by GPM’s current management team, which has significant industry and public market experience, including Arko’s and GPM’s CEO, Arie Kotler. Arko and GPM will also benefit from Haymaker’s investing and operational experience at Fortune 500 companies, particularly in the consumer and hospitality sectors.