The agreement also includes the rights to supply fuel to approximately 200 retailers, commercial, government and industrial customers, as well as TEG’s bulk storage, distribution and transportation operations, all in the southeastern United States.
With the transaction, GPM expands its retail presence in Alabama and Mississippi.
GPM is a wholly owned subsidiary of ARKO Corp. The acquisition is part of ARKO’s strategic goal of long-term growth and shareholder value generation with its affordable, wholesale and fleet replenishment platform.
“We believe this significant and growing acquisition will drive strategic growth as we add an exceptional team, well-known stores and other assets to our family of community brands,” said Arie Kotler, president, president and CEO of ARKO.
“An agreement of this magnitude complements our core capabilities and will create long-term value for ARKO shareholders and valuable synergies given our existing footprint and proven strategy of adding value to strong local brands while retaining jobs,” he added.
TEG based in Greenville, SC, currently owned by ECP, is a privately held convenience store and wholesale fuel company in the Southeastern United States. TEG has its own growth pipeline and record growth in Alabama, Arkansas, Louisiana, Mississippi, Missouri, North Carolina, South Carolina and Tennessee, operating under the Flash Market brand and several other brands.
This acquisition is expected to increase ARKO’s number of stores to over 1,530 convenience stores and expand the company’s wholesale segment to over 1,800 sites.
Including retail and wholesale, the acquisition is expected to add approximately 285 million gallons of fuel, most of it branded, to the approximately 2 billion gallons the company currently sells annually, according to ARKO.
“ARKO will add value to our stores with their diverse offerings and will skillfully serve our many loyal retail and wholesale customers,” said Stephen Lattig, president and CEO of TEG. “TEG would not be the success it is today were it not for the dedication of its team members. We are thrilled that our team and company are joining a growing and dynamic organization.”
The purchase price is approximately $ 375 million plus inventory value, of which $ 50 million is deferred and payable in two annual payments of $ 25 million, which ARKO may choose to pay in cash or, under certain conditions, stock. ordinary of ARKO, on the first and second anniversary of the closure.
At closing, ARKO intends to fund approximately $ 60 million in cash consideration plus inventory value and other closing adjustments from its sources. The remaining approximately $ 265 million is expected to be funded by Oak Street Real Estate Capital, a division of Blue Owl Capital Oak Street, as part of the previously announced $ 1.15 billion existing agreement with ARKO.
Under this agreement, Oak Street is expected to acquire the real estate assets to be acquired by TEG as part of the transaction and ARKO plans to lease the real estate assets from Oak Street.
Using estimated non-GAAP forward-looking measures, ARKO expects this acquisition to add approximately $ 18 million in adjusted EBITDA year-on-year, which is expected to be $ 27 million year-on-year including synergies, after an incremental rent of approximately $ 16 million from pay to Oak Street for the aforementioned lease.
The completion of the transaction is subject to the occurrence of the conditions precedent. There is no certainty that the transaction will close. BofA Securities Inc. acts as the sole financial advisor to Transit Energy Group and Nelson Mullins Riley & Scarborough LLP and Latham & Watkins LLP act as legal advisors. Greenberg Traurig PA and the law firm Schwarz and L’Altrelli act as legal advisors to ARKO.
“Throughout our ownership, ECP is proud of the progress our partnership with the TEG team has made in building a high quality portfolio of retail and wholesale businesses in the Southeastern United States. I would like to thank the entire TEG team for their efforts and commitment over the past few years, and I look forward to their continued success as part of the ARKO family, “said Rahman D’Argenio, partner of ECP.
ARKO Corp. based in Richmond is a Fortune 500 company that owns 100 percent of GPM Investments and is one of the largest convenience store operators and fuel wholesalers in the United States.
It operates in four reporting segments: retail; wholesale; GPM Petroleum, which sells and supplies fuel to ARKO’s retail and wholesale sites; and Fleet fueling, which manages proprietary card blocking locations, manages third-party card blocking locations, and markets fuel cards that give customers access to a nationwide network of refueling sites.