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SAN ANTONIO and ALLENTOWN, Pa. — The convenience store industry is ripe for continued consolidation and scanning the horizon, looking through the same lens for opportunities across North America, are partners CST Brands Inc. and CrossAmerica Partners LP.
San Antonio-based CST Brands acquired 100 percent of the membership interests of the general partner and 100 percent of the outstanding incentive distribution rights of Allentown-based CrossAmerica Partners, a master limited partnership (MLP), in October. The partnership has since doubled the size of CST's footprint and provided a strong wholesale fuel supply business and vehicle for growth.
CrossAmerica distributes fuel to more than 1,100 locations and owns or leases nearly 750 sites in 21 states. CST has more than 1,000 U.S. convenience stores in 10 states, primarily operating under the Corner Store banner, and more than 860 c-stores in six Canadian provinces that operate under the Corner Store banner in English-speaking provinces and the Dépanneur du Coin banner in French-speaking provinces.
"The convenience store industry is still extremely fragmented and is ripe for further consolidation. You still see the remnants of the major [oil companies] getting out of the space. Also, the MLP space is creating another avenue for growth. With our favorable capital structure here, we can get deals done,” CrossAmerica President Jeremy Bergeron told CSNews Online. Bergeron joined CrossAmerica from CST in March.
Since combining forces, the companies have already jointly acquired Nice N Easy Grocery Shoppes in central New York, Timewise c-stores from Landmark Industries in south Texas, and the One Stop network in West Virginia. Going forward, all acquisitions will be made through the joint lens of CST and CrossAmerica because while there are two different companies, there’s only one mergers and acquisitions (M&A) team.
“Lehigh Gas [now CrossAmerica] had a great reputation as an acquirer and CST has a great reputation as an operator, and marrying the two is unique, I think,” said Stéphane Trudel, senior vice president of mergers and acquisitions at CST. Based in Montreal, he leads the four-person M&A team.
“We’re looking for as much synergy as we can with our existing business,” Trudel continued. “We’re looking at expanding our geography with companies that lead in their location. We’re really looking anywhere in North America.”
AN ATTRACTIVE ACQUIRER
Companies looking to shed c-store assets are interested in selling to CrossAmerica and CST because they know "we will treat their employees fairly and with the utmost respect. That makes us an attractive acquirer," Bergeron told CSNews Online.
Likewise, Trudel knows it’s not just about money to a lot of owners, who typically run family convenience businesses and want to see their core values maintained throughout the process.
”We have a lot of respect for sellers and we have a lot of respect for what they’ve built, and we want to ensure we don’t destroy that. We try to understand what makes that group special and make sure we maintain that,” he said. “When you reach that point where you feel it’s a win-win, to me that’s the most rewarding part. And finding a company that adds something to CST is also rewarding.”
As for the type of assets CST and CrossAmerica are looking to jointly acquire, they must be positive additions for both companies. "There are many assets up for sale, but some really benefit both companies extremely well," Bergeron said. "We often like either an existing market where we can further grow our footprint or an adjacent market where we want to grow further out.
“However, we also still consider areas where we have no presence, but where we see it as a strong, growing market,” he added. “We also look for opportunities to expand store sales with our offerings and leverage our buying power that can grow earnings at the stores."
As has already been witnessed, growth is a top priority for the partners — CST has set a goal of $150 million-$200 million of acquisitions a year — and with no shortage of opportunities in the North American c-store/petroleum market, Trudel is eager for what lies ahead.
“You feel you can contribute to the growth of the company, you feel there will be growth, and there are signs of this growth. This is the beginning of something big,” he said.
For more on CST Brands' ongoing transformation and a look at the people working behind the scenes to make it happen, check out the August issue cover story of Convenience Store News.