FRANKLIN, Tenn. -- One month after receiving an infusion of cash from its initial public offering (IPO) of stock, Delek US Holdings Inc. made good on its promise to grow its retailing portfolio with the purchase of 43 retail fuel and convenience stores from Fast Petroleum Inc., Dalton, Ga., as reported yesterday in a CSP Daily News Flash.
The IPO closed in mid-May after selling 11.5 million shares of common stock at $16 per share, resulting in net proceeds of approximately $172 million. We want to use the profits for growth, Delek president and CEO Uzi [image-nocss] Yemin said at the time, and we're talking about both organic growth and through acquisition.
Franklin, Tenn.-based Delek will fund the cash purchase price of approximately $46 million plus the value of inventory, which will be determined at the completion of the transaction, from its cash and cash equivalents, including the net proceeds of the IPO. The 43 stores are located in northwest Georgia and southeast Tennessee, markets in which the company currently operates only one store.
Fast Petroleum is a nearly 40-year-old, multi-branded jobber operating stores under the Fast banner. It supplies dealers with BP/Amoco, CITGO, Shell, Conoco, Phillips and unbranded products. It also operates two transport companies. Attempts to reach Fast Petroleum executives for comment were unsuccessful.
MAPCO will own 30 of the properties and assume leases for the remaining 13. The consummation of the transaction, which is subject to customary closing conditions, is expected to occur within 30 days.
"We are pleased to announce this definitive agreement, which is consistent with the strategy we stated during our recent initial public offering to continue to expand our concept of the 'neighborhood' convenience store within the Southeast, Yemin. This transaction is representative of the opportunities we believe exist to implement our strategy to grow in our existing and contiguous markets. Through this transaction, we will substantially expand our market presence in northern Georgia and establish our initial presence in Chattanooga and southeast Tennessee, complementing our leading market positions in Nashville, Tenn., and northern Alabama.
Yemin added that he expects the transaction to immediately improve Deleks financial results. As we have previously demonstrated through the successful integration of four large retail acquisitions and several smaller ones, we intend to assimilate these stores quickly through our initiatives to deliver our culture and programs, he said. In operating these stores under our 'neighborhood' store concept, we will price and stock each store individually to meet the customs and tastes of each community, while taking advantage of our purchasing economies of scale and the marketing, operating and financial resources we enjoy as a large convenience store operator.
Finally, Yemin said the company will continue evaluating additional opportunities for retail fuel and convenience store acquisitions."
Delek US Holdings Inc., the U.S. arm of Israel-based Delek Group Ltd., is a diversified energy business focused on petroleum refining and supply and on retail marketing. The company's business consists of two main operating segments: refining and retail. The refining segment operates a high conversion, independent refinery, with a design crude distillation capacity of 60,000 barrels per day, in Tyler, Texas. The retail segment markets gasoline, diesel and other refined petroleum products and convenience merchandise through a network of 350 company-operated retail fuel and convenience stores, operated under the MAPCO Express, MAPCO Mart, East Coast and Discount Food Mart brand names.
In related news, Chicago-based William Blair & Co. initiated research coverage of Delek US Holdings this week with an outperform rating and company profile of aggressive growth.
Delek has achieved dramatic improvement in the profitability of its refinery, which operates in a protected niche market, and several important initiatives could significantly elevate performance over the next several years, analyst Mark Miller said. The company has ample opportunities in its retail operations as well, particularly in foodservice and private label, and further growth through acquisitions is likely in this highly fragmented industry.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.