ARKO Corp. announced that GPM Investments, LLC, a wholly owned subsidiary of ARKO, and certain of GPM’s subsidiaries have agreed to acquire assets from Transit Energy Group (TEG). This includes approximately 150 convenience stores; fuel supply rights to approximately 200 dealers, commercial, government and industrial customers; as well as TEG’s bulk storage, distribution and transportation assets, all in the southeastern United States.
This acquisition is part of ARKO’s strategic focus on growth and generating long-term stockholder value with its convenience, wholesale and fleet fueling platform. The purchase price is approximately $375 million plus the value of inventory, of which $50 million is deferred and payable in two annual payments of $25 million, which ARKO may elect to pay in either cash or, subject to certain conditions, shares of ARKO’s common stock, on the first and second anniversaries of the closing. At closing, ARKO intends to finance from its own sources approximately $60 million of the cash consideration plus the value of inventory and other closing adjustments. The remaining approximately $265 million is expected to be funded by Oak Street Real Estate Capital, a Division of Blue Owl Capital, as part of the previously announced existing $1.15 billion agreement with the company, according to which Oak Street is expected to acquire the real estate assets to be acquired from TEG as part of the transaction, and the company expects to lease the real estate assets from Oak Street.
Using estimated forward-looking non-GAAP measures, the company expects that this acquisition will add approximately $18 million of Adjusted EBITDA on an annualized basis, which is expected to be $27 million on an annual run rate including synergies, after incremental rent of approximately $16 million to be paid to Oak Street for the aforementioned lease.
TEG, currently owned by ECP, is a large, privately held convenience store and wholesale fuel company in the southeast United States that has distinguished itself by buying and investing in convenience stores with family histories and long-term presence in their communities, which is aligned with ARKO’s long-standing growth strategy. TEG has its own growth pipeline and a record of growth in Alabama, Arkansas, Louisiana, Mississippi, Missouri, North Carolina, South Carolina and Tennessee, operating under the Flash Market banner and several other brands.
“We believe this significant, accretive acquisition will drive strategic growth with the addition of an exceptional team, well-known stores and other assets to our Family of Community Brands,” said Arie Kotler, president, chairman and CEO of ARKO. “A deal of this magnitude complements our core capabilities and will create long-term value for ARKO stockholders and valuable synergies given our existing footprint and proven strategy of adding value to strong local brands while keeping jobs in place.”
This acquisition is expected to increase ARKO’s store count to over 1,530 convenience stores, expand the company’s retail footprint to Alabama and Mississippi and grow the Family of Community Brands in other regions, introducing more consumers to its high-value fas REWARDS loyalty program. The acquisition would also include a network of approximately 200 dealer sites, expanding the company’s wholesale segment to over 1,800 sites. Including retail and wholesale it is expected that the acquisition will add approximately 285 million gallons of fuel, the majority branded, to the approximately two billion gallons the company currently sells annually.
“ARKO will add value to our stores with their diverse offerings and ably serve our many loyal retail and wholesale customers. TEG would not be the success it is today if it were not for the dedication of its team members. We are excited that our team and company are joining a growing and dynamic organization,” stated Stephen Lattig, president and CEO of TEG.
“Over the course of our ownership, ECP is proud of the progress that our partnership with the TEG team has made in building a high-quality portfolio of retail and wholesale assets across the southeastern United States. I would like to thank the entire TEG team for their efforts and commitment over these past few years, and I look forward to their continued success as part of the ARKO family,” said Rahman D’Argenio, partner at ECP.
“We believe that our differentiated business model is very resilient, and we plan to continue making strategic acquisitions at highly attractive multiples, making use of our strong liquidity while leveraging our valuable relationship with Oak Street,” added Kotler.