SANFORD, N.C. -- As The Pantry Inc. looks at a new site for its headquarters, analysts predict more acquisitions are on the horizon for the company. Tim Allen, an analyst with Jefferies & Co., told the Triangle Business Journal there are roughly 42,000 convenience stores in the Southeast with 110 separate companies that operate 25 stores or more.
There are still several years of acquisition potential, he said, pointing out that The Pantry has acquired almost 30 different companies since 1999. It's a roll-out story. They find smaller, less-efficient [image-nocss] convenience store companies with maybe 25 to 50 stores or less, and they instantly get a boost in operating margins by putting them on their beverage- and food-supply contracts and gasoline contracts.
Allen's comments echo those made by Randy Karchmer, managing director of Morgan Keegan & Co., in the June issue of CSP. The South is a vibrant market[but] the convenience store market is still very fragmented, he said. Deals are getting done more easily. You have pent-up buyers and you have sellers who were thinking of selling a few years ago but valuations weren't where they are today.
For The Pantry, once an acquisition is complete, it takes about a month to absorb a company into the new parent's operations. They've got it down to a science, Allen said.
The company doesn't just grow through acquisitions. The Pantry's management plans to open seven new stores in 2006, 12 to 15 in 2007 and 20 to 25 in 2008, according to the Triangle Business Journal report. Most of the new stores are a larger format averaging 4,000 to 5,000 square feet.
The report comes as The Pantry is looking at relocating its headquarters into the Triangle area of North Carolina, specifically in Cary, N.C.
Pantry executives have been looking at Triangle office buildings in search of 30,000 square feet of space, enough to accommodate about 85 headquarters employees, according to the report. Real estate sources said the company is close to signing a lease at the 2000 Regency Parkway building in Cary, about 30 miles from The Pantry's corporate headquarters in Sanford, N.C.
In other Pantry news, the board of directors has appointed Maria C. Richter and Wilfred (Bill) A. Finnegan to serve as directors of the company. The appointments, which are effective July 5, 2006, increase the size of the board from eight members to 10.
Finnegan, 48, is an independent consultant and most recently served as a senior advisor to the Carlyle Group. He co-founded the high-yield-securities business at JPMorgan Chase (then Chemical Bank) in 1993 and served as a managing director in various roles.
Richter, 51, founded her own consulting firm, MCHR Consulting, in 2005. Previously, she was with Morgan Stanley for nine years, most recently as managing director and head of the Corporate Finance Retail Group, with responsibility for large retailing clients of the firm.
The Pantry is one of the largest convenience store operators in the country, and the company has aggressively been expanding its footprint across the Southeast over the past few years. In the past nine months, The Pantry has acquired 107 stores. Add in 96 stores purchased during fiscal 2005, and the company now has 1,458 stores in 11 states operating under various brands, including Kangaroo and Lil' Champ. The company has more than 9,000 employees spread across those stores.
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