Speedway to Acquire Hess Retail Network | ConvenienceStoreNews
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    Speedway to Acquire Hess Retail Network

    By Brian Berk, Convenience Store News

    ENON, Ohio -- Speedway LLC will soon extend its convenience store footprint from nine states to 23, securing a foothold in most regions of the Northeast and Southeast. Following months of speculation, the division of Marathon Petroleum Corp. (MPC) announced Thursday an agreement to purchase Hess Corp.'s 1,256-store retail division for a total cash consideration of $2.87 billion.

    The transaction is expected to close late in this year's third quarter, assuming regulatory approvals are obtained. Once the deal is complete, Speedway will have 2,733 company-owned stores, enough to become the second-largest c-store operator in the United States, according to Gary Heminger, president and CEO of MPC.

    "It's a transformative transaction," Heminger said during a conference call Thursday morning. "It accelerates our strategy to grow higher valued and stable cash flow businesses."

    MPC will fund the transaction with both cash and debt. The combined company will have $27 billion in annual revenue. Approximately $75 million in expense savings will be realized, noted Speedway President Tony Kenney.

    Under the terms of the agreement, many Hess locations will continue to carry the company's well-known kelly green logo for the short term. However, Speedway must rebrand all 1,256 Hess locations to its own brand within three years of the transaction closing. Hence, all Hess stations will carry the Speedway brand name by the end of 2017.

    Once the transaction is complete, Speedway will set forth plans to expand growth at the Hess locations, stated Kenney. The Enon, Ohio-based retailer will primarily focus on drawing customers inside the store with specific plans to increase foodservice and general merchandise margins. Speedway's Speedy Rewards loyalty program will also be introduced to all the acquired locations.

    A LONG TIME COMING

    New York-based Hess announced in early 2013 that it planned to spin off or sell its retail division and focus on becoming a pure-play exploration and production company. The oil company said Thursday it will use the proceeds of this transaction to increase its existing share repurchase authorization from $4 billion to $6.5 billion.

    "The sale of our retail business marks the culmination of our strategic transformation into a pure-play exploration and production company," CEO John Hess stated in a news release. "I especially want to express my deepest appreciation to our employees in the retail business for their outstanding work and extraordinary dedication over the years building the Hess brand and serving our loyal customers."

    MPC's interest in Hess' retail division dates back to April 29, 2013, when CSNews Online reported that Heminger commented during an earnings call that Hess' retail assets were a good fit for Speedway. "Hess primarily has retail on the eastern seaboard that could complement our business well," he said at the time. "Hess has very good-looking assets."

    Heminger made very similar comments today and added that he is glad Speedway submitted the winning bid. Other c-store chains were reported to be interested in Hess' retail division, primarily Alimentation Couche-Tard Inc.

    "I would have been disappointed if the transaction went to another party because we have so many synergies," Heminger said during today's conference call.

    When questioned by an analyst as to whether MPC will convert its future retail assets into a master limited partnership, Heminger didn't directly answer the question, but he did note that Speedway will have many options moving forward to enhance shareholder value.

    By Brian Berk, Convenience Store News
    • About Brian Berk Brian Berk is managing editor of Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner, where he specializes in covering motor fuels, technology and financial news. He has served the magazine industry for 13 years and has also worked in the radio and newspaper fields. Berk holds a bachelor's degree in communications from the State University of New York at Cortland and a master's degree in journalism from Quinnipiac University in Hamden, Conn.
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