DALLAS & LOMBARD, Ill. -- If it hadn't been a deal with 7-Eleven, it would have been a deal with someone elsethat's the situation the White Hen convenience store chain found itself in earlier this year when it began working with an investment banker to review its financial alternatives, according to CEO Brandon Barnholt.
Ultimately, White Hen was the size of a company that had to become bigger, Barnholt told CSP Daily News, and to do that, we either had to have a capital infusion that would allow us to grow significantly on an independent basis or [image-nocss] we had to combine forces with someone like 7-Eleven.
And so it was that the 40-year-old, Lombard, Ill.-based chain began shopping itself to private equity firms and other strategic buyers with the goal of reaching a new plateau.
We were going to infuse equity into the company and make some changes in the capital structure because we just knew that we were in that middle ground, Barnholt said. We were big enough to have some scale and knew that we had something good that could grow, but we were too small to be as effective as we wanted to be. So there was a transaction of some kind that was imminent.
That transaction came in the form of a sale to Dallas-based 7-Eleven, as reported first in a CSP Daily News Flash on Friday. In its largest acquisition in 20 years, 7-Eleven Inc. purchased White Hen Pantry Inc. and its 206 stores in the Chicago area and Northwest Indiana, and licenses for another 55 sites in Boston. The deal was for $52.5 million, according to Joel Schwartz, managing director in the private-equity group of Angelo Gordon & Co., New York, which helped buy the company out of bankruptcy with Barnholt and other company execs in 2003.
We tried to acquire [White Hen] three years ago, obviously because of how much we thought of them, 7-Eleven president Joe DePinto told CSP Daily News. The opportunity came up [again], and this was a great chance for us to purchase a great competitor we've respected for quite some time. It really shores up our case in Chicagoland.
With the addition of the White Hen stores, the number of stores 7-Eleven operates, franchises and licenses in North America increases to more than 7,100. The deal also more than doubles 7-Eleven's presence in the Chicago area, a long-term goal of the chain, according to spokesperson Margaret Chabris. There has been a long desire for us to grow in Chicago for several years, she told CSP Daily News. It just was taking us longer than we'd like it to. Chicago, Boston and Los Angeles have been important growth markets for us. So we're extremely excited about this transaction.
Following 7-Eleven's announcement that it would acquire the more than 250 White Hen stores, DePinto made clear that any changes to the highly successful White Hen model would be made only after measured research and careful planning. We've respected [White Hen] for a long time, DePinto said. The plan is to really get to know them, understand the ins and outs of how they operateto assess and research. Once we have all that research, we'll see how that affects anything operationally. Is there going to be change? Certainly there's going to be change, but whatever changes we make, they'll be made based on how they will positively impact our customers, our franchisees and our associatesand that now includes our White Hen associates.
The day after the announcement, DePinto and members of the 7-Eleven executive team met with White Hen's senior team at White Hen's headquarters in Illinois. The getting to know you process will continue for the next two weeks, as DePinto and his team meet face-to-face with White Hen associates and franchisees.
White Hen has gone through a lot of change in last six years with the purchase by Clark and then by Angelo Gordon, said DePinto. What I'm most excited about for White Hen is that they're now owned by the largest premier name in the convenience store business and we provide a lot of stability as well as outstanding systems to go along with great fresh-foods programs. It's going to be good for them because it provides a little more stable environment for that organization. 7-Eleven is going to bring in plenty of muscle.
Barnholt said that's a two-way street because White Hen has a lot to offer 7-Eleven, as well. I think the progress that we've made at White Hen over the last several years, particularly in the area of fresh food, will be good for 7-Eleven. I believe that they intend to try to learn some things along the way, he said. I think it's a great combination that benefits White Hen's people significantly, but I think it's going to benefit 7-Eleven beyond just 200 more stores.
The White Hen acquisition may just be phase one of a wider growth strategy. 7-Eleven will use a three-pronged growth approach consisting of acquisitions, new builds and franchisees, according to a Dallas Morning News report. DePinto told CSP Daily News he is really bullish on growth opportunities, particularly in areaswe're concentrated in. We will spend a significant amount of time assessing [opportunities] in those parts of the country.
Places like Philadelphia, like New York, like Los Angeles, that's where they want to grow, Tariq Khan, chairman of the National Coalition of Associations of 7-Eleven Franchisees, Rockville Centre, N.Y., told CSP Daily News. Take New York and Long Island, where 7-Eleven has a very good market share, or somewhere like the Boston area. Joe [DePinto] and his people will definitely look into these markets if it makes sense.
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