Convenience Store News

JUL 2015

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44 Convenience Store News | JULY 2015 | WWW.CSNEWS.COM COVER STORY The Federal Reserve kept interest rates at zero dur- ing its June 17 meeting. But industry pundits such as Phil Orlando, chief equity strategist and portfolio manager at Federated Investors, point to September as the first time the Fed would look to raise interest rates, with the possi- bility of another rate hike in December. If the stock market corrects, several potential acquirers could hold back on M&A activity fearing they must maintain their capital. Sartory stressed, however, that an interest rate hike alone doesn't necessarily mean a big stock market decline will take place. "The market only tends to act violently if unintended consequences occur," he said. "If interest rates only rise 25, 50 or 75 basis points over the next year, I don't see that throwing cold water over the M&A market. Historically, we would still be in a very low interest rate environment and I think the party continues." The party could stop, though, if supply and demand metrics change. Plenty of c-store assets are currently on the market because sellers are seeking — and recently have been receiving — premium prices for their assets. If buyers find out that purchased assets have not been performing up to expectations, they can remove themselves as acquirers, leaving plenty of sell- ers on the market and few buyers, which would make asset price tags come down sharply. "If a company makes an acquisition and a year later learns they overpaid and it is not reaching their financial goals, that may make some public companies that have been very aggressive in their bidding think twice," responded Sartory. At least in the near-term, Ruben believes there will be no seller shortage. But looking out further, c-stores are performing so well now that some sellers may sit on the sidelines and enjoy the ride as opposed to shed- ding assets, he noted. "Sellers may look at their assets and say, 'I under- stand the multiples are very strong, but I'm making a lot of money right now. If I cash out, tell me where I can park this money to get the same kind of return?'" he concluded. "It's a really good question." — Brian Berk In fact, even the acquirers could become the acquired. In a recent Barron's article, Mario Gabelli, chairman and CEO of Gamco Investors, said CST Brands — which along with its partner CrossAmerica Partners LP has purchased multiple c-store assets in recent months — could itself be taken off the market by a competitor. "CST's CEO Kim Lubel isn't opposed to a takeover if somebody knocks on the door and offers the right price," said Gabelli. CaN aNYthING stoP thE PaRtY? Right now, little can slow down the M&A environ- ment that Ruben of NRC Realty characterizes as a "perfect storm in a positive way." "You have low interest rates, multiples that have been high, and strong fuel margins allowing customers to have more disposal income," he said. "The trends we've seen for c-store retailers for the past six months have been very positive. Before long, you will have one-third of the convenience stores in this country in the hands of a half-dozen people." There is likely only a couple of ways to slow down the flurry of M&A activity the c-store industry is see- ing, according to Sartory. Macroeconomic events, including weakening of the credit markets or the over- all economy, would curtail such activity. "Something that pushes the economy into a reces- sion would be one way. Also, it looks like the Fed [Reserve Bank] will look to raise short-term interest rates. This could cause the stock market to go down. It's even possible the market could correct by more than 10 percent once this happens." 28 104t United Pacific, Los Angeles 76 74 104t Mirabito Energy Products, Binghamton, N.Y. 30 84t 65t Gas Mart USA Inc., Leawood, Kan. 19 23t 41 Western Refining Inc., El Paso, Texas 18 92 109 Jet Pep, Holly Pond, Ala. 17 12 28 CHS Inc., Minneapolis 16 76 92 Spinx Oil Co. Inc., Greenville, S.C. 16 30 43 CrossAmerica Partners LP, Allentown, Pa. 13 84t 97t Johnson Oil Co., Rock Falls, Ill. 13 87t 99 Express Mart Franchising Corp., Syracuse, N.Y. 12 90 101 Buchanan Oil Co., Omaha, Neb. 11 82t 93t Newcomb Oil Co., Bardstown, Ky. 11 Source: Nielsen TDLinx; Convenience Store News Market Research 2015 2015 2014 Rank Rank Company Spots Moved BiggEST MOVERS Bonus Content on Check out the special features section of for additional content, including: · Ones to Watch (smaller chains with big ideas) · Regional Breakouts: Northeast, South, Midwest and West

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