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Couche-Tard sells CrossAmerica ownership

Alimentation Couche-Tard Inc. sold its ownership interest in CrossAmerica Partners LP; however, the move will not affect the asset exchange pact between the two companies.

Couche-Tard reached the deal with investment entities controlled by Joe Topper, the founder of Allentown-based Cross America. Topper is a current member of the board directors of CrossAmerica’s general partner.

Unknown-5The CrossAmerica interests sold consist of 100% of the general partner interest, 100 percent of the incentive distribution rights and approximately 7.5 million CrossAmerica limited partner units. The transaction’s price tag was not disclosed.

According to CrossAmerica, Topper returns as chairman of the board of the company’s general partner. In addition, the transaction does not involve any capital outlay by CrossAmerica nor change its capital structure.

“At this time, we anticipate maintaining our current distribution policy, distribution coverage and leverage ratio targets that have been outlined over the past few quarters,” Topper said. “I am excited for the future of the partnership. In the coming weeks and months, I and the management team look forward to sharing in more detail with our unitholders our strategy and goals for CrossAmerica.”

Laval, Quebec-based Couche-Tard acquired CrossAmerica’s general partner, CrossAmerica GP LLC, as part of its acquisition of CST Brands Inc. in July 2017. That deal also gave Couche-Tard 100 percent of the incentive distribution rights in CrossAmerica, and approximately 6.9 million of CrossAmerica limited partner units.

The decision to sell its entire ownership interest came after a strategic review, according to Couche-Tard.

“The sale of our interest in CrossAmerica benefits both parties and allows each to focus on growing their core businesses. As we complete the remaining exchange of assets with CrossAmerica, we will continue to look for opportunities for future exchanges which create value for our shareholders and CrossAmerica’s unitholders,” said Brian Hannasch, president and CEO of Couche-Tard.

Greenhill & Co. acted as the exclusive financial and strategic advisor to Couche-Tard on the transaction. Faegre Baker Daniels LLP acted as the legal advisor to Couche-Tard. Skadden, Arps, Slate, Meagher & Flom LLP acted as the legal advisor for the investment entities controlled by Joe Topper.

ASSET EXCHANGE AGREEMENT

Couche-Tard and CrossAmerica also reached a pact for an additional asset exchange transaction between the two organizations. This new exchange includes a select portion of Couche-Tard’s U.S. dealer business and CrossAmerica’s ownership interest in CST Fuel Supply LP. Specifically:

  • Couche-Tard will transfer U.S. wholesale fuel supply contracts covering 387 sites and 45 fee and leasehold properties to CrossAmerica; and
  • CrossAmerica will transfer its 17.5% limited partner interest ownership in CST Fuel Supply LP to Couche-Tard.

Couche-Tard will retain its dealer sites in California and those operated through its RDK joint venture as well as other strategic fuel wholesale assets across different parts of the country.

The companies expect to close the exchange transaction in the calendar first quarter of 2020. It has been approved by the Conflicts Committee of the board of directors of CrossAmerica’s general partner, which was advised by Evercore as its independent financial advisor and by Richards, Layton & Finger, P.A. as its independent legal counsel.

It is the third and final tranche of the asset exchange agreement that was announced on Dec. 17, 2018. CrossAmerica said it anticipates continuing to explore opportunities for future exchanges with Couche-Tard that create value for Couche-Tard shareholders and CrossAmerica unitholders.

“The announcement of this most recent exchange of assets with Couche-Tard shows the tremendous growth opportunities for CrossAmerica and our ability to continue to increase value for our unitholders,” Topper said.

Skadden, Arps, Slate, Meagher & Flom LLP acted as the legal advisor and Matrix Capital Markets Group Inc. acted as the financial advisor for the investment entities controlled by Joe Topper.

Originally published at Convenience Store News. 


Screen Shot 2019-08-13 at 3.04.52 PM

CrossAmerica exiting retail operations as Circle K takes over

Screen Shot 2019-08-13 at 3.04.52 PMCrossAmerica Partners LP is making good on its strategic initiatives, moving closer to exiting direct retail operations and according to President and CEO Gerardo Valencia, the company is confident about delivering on its goals for the future.

In May, CrossAmerica and Alimentation Couche-Tard Inc. completed the first in a series of asset swaps.

“We completed our first tranche of the asset exchange with Circle K on May 21 in which we received 60 sites,” Valencia said during CrossAmerica’s second-quarter earnings call on Aug. 6.

The sites are now under CrossAmerica’s wholesale fuel segment.

“We are now working on our second one and we have signed contracts with dealer for 65 additional sites. Most of which will be part of the second tranche of assets to be exchanged,” he explained.

According to the chief executive, the company is completing its final due diligence and expect to the transactions finalized before the end of the third quarter.

Based on the current timeline CrossAmerica expects the final assets to change hands by the first quarter of 2020.

As part of the overall exchange agreement, CrossAmerica will receive 192 company-operated convenience and retail fuel stores in the United States. Of the sites, 162 are fee-based and 30 are leased. The transaction is valued at $184.5 million, as Convenience Store News previously reported.

CrossAmerica’s general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of Couche-Tard.

For its part, Couche-Tard’s Circle K division will receive the real estate property for 56 U.S. company-operated convenience and retail fuel stores currently leased and operated by Couche-Tard/Circle K.

In addition, Circle K will receive 17 company-operated stores in the upper Midwest region of the U.S. Fourteen of the sites are fee-based and three are leased. All of the 17 sites are currently part of CrossAmerica’s retail segment.

Those assets also have an aggregate value of approximately $184.5 million.

In addition to the asset swap pact with Couche-Tard, CrossAmerica has been making progress on its rebranding efforts at the former Jet-Pep sites in Alabama. CrossAmerica acquired the sites in late 2017.

“Over half of the 90 sites have now been hard branded and reimagined through the Marathon brand, and we have changed dispensers in over half of the network,” Valencia said.

“As we improve the network quality, we’re seeing the benefits as we planned, optimizing the volume and profitability of the network, with an increase of 47%t over the first half of 2018,” he explained. “As we complete the work by the third quarter of the year, we expect further growth from these networks.”

In addition, as the second quarter was coming to a close, CrossAmerica entered into a master fuel supply and lease agreement with Applegreen plc. Under the terms of the agreement, Applegreen will run 46 company-operated retail stores in the Upper Midwest.

“We are very excited to expand our relationship with them. They are very strong operator and we expect to finish the year with over 100 sites by the end of 2019,” Valencia said.

Q2 FINANCIALS

In the second quarter, CrossAmerica reported $13.9 million in operating income and $6.4 million in net income. This compares to an operating loss of $1.6 million and a net loss of $6.9 million for the second quarter of 2018.

This resulted in adjusted EBITDA growth and strong distributable cash flow, Valencia noted. Specifically, adjusted EBITDA was $27.7 million and distributable cash flow was $22.3 million.

“As previously mentioned, we plan to exceed our direct retail operations to focus on working what we do best. We expect that as we do this, our adjusted EBITDA will actually grow as we generate efficiencies in this process,” he said.

In addition, CrossAmerica will continue to assess other opportunities whether that is third party acquisitions or current assets at Circle K, according to Valencia.

“All of these will continue to be with discipline to continue to deliver growth. We are growing and delivering on our plan,” he said.

Allentown-based CrossAmerica is a wholesale distributor of motor fuels and owner and lessee of real estate used in the retail distribution of motor fuels. Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded petroleum for motor vehicles in the United States and distributes fuel to approximately 1,300 locations and owns or leases nearly 1,000 sites. With a geographic footprint covering 31 states, the partnership has relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, CITGO, Marathon and Phillips 66.

Originally published at Convenience Store News. 


Couche-Tard & CrossAmerica complete first in series of asset swaps

Couche-Tard CrossAmerica Logos_Sm_121718Alimentation Couche-Tard Inc. and CrossAmerica Partners LP completed the first transaction in an asset swap pact.

The two companies entered into the Asset Exchange Agreement in December 2018. As part of this exchange agreement, CrossAmerica will receive 192 company-operated convenience and retail fuel stores in the United States. Of the sites, 162 are fee-based and 30 are leased. The transaction is valued at $184.5 million.

CrossAmerica’s general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of Couche-Tard.

For its part, Couche-Tard’s Circle K division will receive the real estate property for 56 U.S. company-operated convenience and retail fuel stores currently leased and operated by Couche-Tard/Circle K.

In addition, Circle K will receive 17 company-operated stores in the upper Midwest region of the U.S. Fourteen of the sites are fee-based and three are leased. All of the 17 sites are currently part of CrossAmerica’s retail segment.

Those assets also have an aggregate value of approximately $184.5 million.

In this first transaction, Couche-Tard transferred to CrossAmerica 60 (52 fee and eight leased) U.S. company-operated convenience and fuel retail stores having an aggregate value of approximately $58.1 million.

In exchange, CrossAmerica transferred to Couche-Tard assets having an aggregate value of approximately $58.3 million. These assets include all 17 of the Upper Midwest properties and the real property for eight master-lease properties, according to the two companies.

Before the completion of the first tranche, Couche-Tard struck dealer agreements for Circle K c-stores transferred to CrossAmerica. The pacts included leases and fuel supply agreements with independent dealers who will lease and operate the stores.

These agreements were assigned to CrossAmerica as part of the exchange.

Under a Sub-Jobber Agreement, Couche-Tard will supply fuel to CrossAmerica for resale to the dealers at those 60 stores after the exchange. The terms of that agreement were unanimously approved by the independent Conflicts Committee of the board of CrossAmerica’s general partner in December.

The existing fuel supply arrangements for the eight master lease properties will remain unchanged.

When the two companies first agreed to the asset swap, they expected the exchange to take place through a series of tranches over 24 months. However, the two now anticipate completing the transactions by the end of the first quarter of calendar year 2020.

“We are very pleased with the process we have established to make this a smooth and fast transition. We have identified very strong operators to maximize the potential of the sites we are taking over from Circle K and have a strong pipeline for the remaining 132 sites,” said Gerardo Valencia, CEO and President of CrossAmerica.

Laval-based Alimentation Couche-Tard is the leader in the Canadian convenience store industry. In the United States, it is the largest independent convenience store operator in terms of the number of company-operated stores. In Europe, Couche-Tard is a leader in convenience store and road transportation fuel retail in the Scandinavian countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia and Lithuania), as well as in Ireland and has an important presence in Poland.

Allentown, Pa.-based CrossAmerica Partners is a wholesale distributor of motor fuels, and owner and lessor of real estate used in the retail distribution of motor fuels.  Formed in 2012, it is a distributor of branded and unbranded petroleum for motor vehicles in the U.S. and distributes fuel to more than 1,200 locations and owns or leases approximately 900 sites. With a geographic footprint covering 31 states, it has well-established relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66.

Originally published at Convenience Store News.