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NEW YORK -- ExxonMobil has completed the sale and transfer of over 800 retail sites since announcing its intent to sell all of its company and dealer operating sites in the U.S. in 2008. But, while the company is well on its way to completing its divestiture program, more than 1,000 sites are still available for companies interested in purchasing any of ExxonMobil’s remaining assets, according to John C. Flippen, Jr., a managing director with Petroleum Capital and Real Estate, LLC., (www.PetroCapRE.com), a major business and real estate advisor in the convenience store industry.
PetroCapRE has represented clients in all of the geographic markets in which ExxonMobil has already completed its divestment program over the past two years. Flippen, in an interview with CSNews Online, listed some of the important issues prospective purchasers should consider before entering the bid process.
CSNews: Will this be a once in a lifetime opportunity?
Flippen: Yes. Major oil company assets, such as ExxonMobil’s, are typically located on the busiest arteries, best corners, and in the some of the strongest and most desirable markets in the United States. In addition, these assets are available via a bulk sale bidding process and as a result, typically sell for a lower multiple when compared to a single site sale. Therefore, this is a “once in a lifetime” event.
CSNews: How should a company model these assets?
Flippen: Now, this is the tricky part. A successful bidder will need to develop a model that captures an operational strategy that maximizes the cash flow (EBITDA) of each location. The model that has the potential to produce the greatest amount of site level EBITDA will strategically position that bidder to win bid process. Keep in mind, in our experience, all other factors held equal, the highest bid always wins.
CSNews: In today’s market, how does a buyer finance these assets?
Flippen: Cash, cash, and more cash. Of course, if we all had a ton of cash we wouldn’t need financing. Our company and other advisory firms have been able to obtain financing for these assets from senior lenders, sale lease back companies, mezzanine investors, and equity partners. The ExxonMobil assets have been financed with less than 10 percent equity and as much as 50 percent in equity. When thinking about the capital structure it is important to keep in mind your long range plans for each location. Do you want to own the real estate? Do you want to sell the keys? Are you only interested in the fuel supply? If the bid price is reasonable and the business plan is sound, the financing will become a natural extension of your strategy.
CSNews: Do you need to be a current ExxonMobil jobber to place a bid?
Flippen: No. ExxonMobil has sold many of its key markets to jobbers that were not previously carrying either the Exxon and/or Mobil flags.
CSNews: What about the environmental liability?
Flippen: We believe that the current marketplace provides several options to “wall off” the environmental risks associated with completing a large acquisition of retail sites at one time. The key is to retain environmental lawyers and consultants with transactional experience and financial advisors who can explain the risks to your potential lending institutions.
Flippen concluded by emphasizing that the process of securing the funds and developing a capital structure that complements a successful bidder’s long term business plan is very different than closing a single site transaction with a local bank. ExxonMobil has seen a myriad of business models over the past two years and has the experience to recognize a well thought out business strategy and supporting capital structure, he added. Therefore, the best course of action, according to Flippen, is for prospective bidders to align themselves with a proven professional advisory services firm that specializes in the convenience sector to help through the bid process, create the appropriate financial model and capital structure, and assist in the transaction closing.