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    Susser to Acquire Town & Country

    The two companies share many similarities, making it a great fit, executives say.

    CORPUS CHRISTI, Texas -- Susser Holdings Corp., operator of the 330-store Stripes convenience chain, signed agreements to acquire the parent company of privately held convenience store chain Town & Country Food Stores, located in San Angelo, Texas, for $361 million in cash. The amount is subject to certain closing adjustments and before transaction costs and expenses, the company stated.

    "Town & Country was not for sale. We have been in communication with them for a long time. It was very much soliciting in making an offer on my part. And these negotiations have been held in strict confidence for many months," Sam L. Susser, Susser Holdings president and CEO, said in a conference call with investors. "We've had our eye on Town & Country for a long time. In fact, we first started talking to them more than eight years ago. So even though this took quite a while to bring to fruition, it is certainly worth the wait."

    Town & Country operates 168 convenience stores in west Texas and eastern New Mexico, 140 of which serve central and west Texas and the Texas Panhandle. In addition, Town & Country owns 14 properties for potential future stores. The company owns approximately 80 percent of all its locations. The company's fiscal 2007 saw sales of $842 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $50 million, the company stated.

    This acquisition is the largest to date for the company in terms of both dollars and store count, Susser said. "It's a great company. And this transaction should provide a strong catalyst for future growth."

    The acquisition is a strategic opportunity to expand Susser's market footprint into contiguous areas that are efficient to serve and manage, he said. "And a very high-quality store base and a people driven culture, is something I think we share in common at Susser," he added.

    He continued: "Our stores are pretty similar in size and format. In fact, over the years, we've talked back and forth with the Town & Country team on best practices and new store planning, so our newer stores look and feel a lot alike." Other similarities include the same back office software system and Verifone's Ruby point-of-sale system, making the upcoming integration "relatively straightforward," he said.

    "The similarity lends itself to moving to a single Stripes brand. We would expect [rebranding efforts] to begin in the fall of 2008, and complete the process in about a year." Susser expects the physical rebranding of the stores to the Stripes brand will cost approximately $11 million.

    Along with the rebranding efforts, the company plans to introduce menu items from its Laredo Taco Company to Town & Country stores, and bring Town & Country's foodservice expertise to Susser's foodservice operations.

    Susser will pay for the deal through debt and lease financing and excess cash. The acquisition is expected to close within 90 days and add to earnings in 2008, the company stated.

    "We believe this is an attractive price, particularly since we are acquiring an extremely high-quality business in complimentary markets that generates a lot of cash and has strong growth characteristics," he said, noting Susser's predominately south Texas presence will reach into the western half of Texas and the eastern third of New Mexico. "These areas are experiencing brisk economic growth, due to strong oil and gas activity."

    In addition, Susser stated there is additional room to add stores across these markets that are experiencing growth. "We will continue to open stores in existing Susser retail markets at a steady pace, and we will begin to develop new sites in existing Town & Country markets," he said. "We are on track to open 18 to 22 new Stripes stores in calendar 2007, although we expect that pace could decrease in 2008 as we focus on integration and deleveraging."

    "The geography of this acquisition not only exposes us to strong economic activity in these areas, but allows us to diversify our market concentration away from the border and Rio Grande valley economies," he said.

    Town & Country has a positive momentum and a people-driven culture with a solid and proven management team, he said. Town & Country has doubled EBITDA in less than four years, despite significant capital constraints, he added.

    Alvin New, Town & Country president and CEO, will lead the Town & Country organization, Susser said.

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