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SAN ANTONIO -- CST Brands Inc. is acquiring Nice N Easy Grocery Shoppes, but customers should not expect to see the familiar upstate New York banner change over to CST's Corner Store brand.
In an interview Thursday with CSNews Online, Kim Bowers, chairman and CEO of San Antonio-based CST Brands, said the 77 Nice N Easy locations in New York State -- 33 company operated, 44 franchise locations -- will carry on the 34-year-old name.
"There is a clear, strong community connection and customer loyalty associated with Nice N Easy," she said. "Clearly, [John [MacDougall's] legacy was a network of stores where folks come back time and time again. We want to preserve that as much as possible."
MacDougall was the founder and president of Canastota, N.Y.-based Nice N Easy. He passed away June 21. Earlier this year, MacDougall began looking to take his retail network to a larger platform and started a quiet sale process with Chicago-based NRC Realty & Capital Advisors LLC.
Around the same time, CST Brands tapped NRC Realty to help with its divestiture of 117 Corner Store locations that were identified as smaller in square footage and below the company's overall store average from an inside sales perspective.
The NRC connection brought the two retailers together two months ago.
"We were able to connect through NRC and started the conversation in June," Bowers explained. "Throughout the year, they were doing a quiet sale process. We weren't in that mix, partly because I think CST Brands is still viewed as a southwest U.S network tied to Valero [Energy Corp.]. It wasn't until June that our guys were talking and said this is exactly the kind of network we are interested in. The conversation took off pretty quickly.
"We have a very similar employee culture, customer service, store approach. It's a natural fit for us," she added.
Not only does CST Brands plan to keep the Nice N Easy moniker alive, but it also intends to add to the chain's existing store count. According to Bowers, CST Brands' real estate team will begin looking for additional sites in New York next month.
"They have a strong store presence, terrific inside sales, long-term employees. To be able to grow on that brand recognition in that area of the country is going to be a benefit for CST," she said.
Two Deals in Two Weeks
The deal with Nice N Easy, which is expected to close early in the fourth quarter, comes on the heels of CST Brands' announced acquisition of 100 percent of the membership interests of Allentown, Pa.-based Lehigh Gas GP LLC, the general partner of Lehigh Gas Partners LP. CST will pay approximately $85 million in that transaction, including $17 million in cash and 2.044 million shares of CST common stock, as CSNews Online previously reported. This deal is also expected to close in the fourth quarter.
Terms of the Nice N Easy transaction were not released.
Both Nice N Easy and Lehigh Gas have a strong foothold in the Northeast, which puts them in close proximity to CST Brands' Montreal office. The retailer's regional vice president of operations will oversee the Nice N Easy assets, based out of Montreal.
The Lehigh Gas deal will provide CST Brands with access to capital through a growth-oriented master limited partnership (MLP) vehicle to execute its long-term strategic plan. It will also provide drop-down asset sales to Lehigh Gas Partners, and an expanded set of external opportunities to drive cash flow growth for CST.
CST Brands is still evaluating how Nice N Easy will be integrated into the retailer's plans for Lehigh Gas. "The deal is not conditioned on the Lehigh Gas transaction itself, but assuming all goes as planned on both sides, we likely would have the MLP purchase the assets outright," said Bowers.
It's hard to believe that three months ago, CST Brands marked its one-year anniversary as an independently operated company. It spun off from Valero on May 1, 2013.
"One of the views we have is to grow our footprint really across America," Bowers said. "The industry itself is ripe for consolidation. It is a very fragmented industry. Teaming up with Lehigh Gas gives us access to the MLP capital that will let us grow faster and move more quickly."
Bowers did not detail any specific opportunities on CST Brands' radar.
"We definitely would like to continue to look for other networks that present like Nice N Easy does. They have great customer loyalty, great employees, strong store sales, strong fuel sales. Then, we can grow organically around those networks and increase our footprint that way as well," she explained.
"Strong chains like the Nice N Easy chain are terrific. Chains of 10 are terrific; chains of 100 are terrific. We are looking for the right set of assets. As we focus on building up additional footprint, the Northeast makes sense [because] then we can bring more scale to our operations," Bowers added. "There are a lot of areas. We've got the Southeast and now the Northeast. There are plenty of areas in between to continue to focus on."
Analyzing the Deal
Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, believes Nice N Easy's strength in foodservice and grocery should offer key best practices for CST Brands to leverage within its existing store base.
"We are encouraged by this deal and believe CST will continue to be a strong consolidator as it expands further and leverages its growing store base to drive top-line growth and operating efficiencies," Herzog said.
In addition, given that CST Brands does not currently have any franchise locations in the United States, Herzog said this may be an opportunity for the company to gain knowledge and insight and expand further through franchised stores.