Casey’s General Stores Inc.’s pending acquisition of Fikes Wholesale Inc., owner of 198 CEFCO Convenience Stores, in an all-cash transaction of $1.145 billion, opens up new territory for the regional c-store retailer, not only in Texas, but also in several states in the South.
The CEFCO transaction will increase Casey’s overall retail footprint by 7% to nearly 2,900 convenience stores. It will bring 148 stores to Texas. It will also add 50 stores in the South, with 27 in Florida, 13 in Alabama and 10 in Mississippi—all new states for the chain.
Ankeny, Iowa-based Casey’s moved into Texas—its 17th state—last November with the acquisition of W. Douglass Distributing Ltd.’s 22 Lone Star Food Stores.
Seventh Heaven
“This transaction is highly strategic and will help the company accelerate execution of its three-year strategic plan,” Darren Rebelez, board chair, president and CEO of Casey’s, said on a conference call to announce the CEFCO deal. “This acquisition will quickly expand Casey's presence in Texas, a very attractive market for Casey’s.”
When the deal is completed, Casey’s will have 170 stores in Texas, making it the chain’s seventh largest state. The CEFCO stores are “not really in the big cities … but in in smaller towns,” Rebelez said, but in the middle of a “triangle” formed from Dallas to San Antonio to Houston.
The stores in Florida and Alabama are basically in the Panhandle market, and all of the stores are located in places “very consistent from a geographic perspective with the mothership of Casey's,” he said.
Handling the Panhandle
“We really like what we see [in the Florida Panhandle] from a competitive standpoint,” he said. “This was more of an expansion market for CEFCO, and so a lot of those stores are new within the last couple of years. And there's a lot of legacy industry assets down there at this point. So we think from a competitive standpoint, we're sitting really, really in a good position. We know there's some other competitors that are coming in, none of those competitors are to us, we're very familiar with them, so we feel really good about that geography in particular.”
Casey’s Joplin, Missouri, distribution center will supply the Texas stores. “We're assessing how we want to handle the Florida, Alabama, Mississippi stores” in terms of distribution, Rebelez said.
Casey's shared its current three-year strategic plan in June 2023 and committed to adding at least 350 new units by fiscal 2026. The CEFCO deal, along with its strong growth in fiscal 2024, will enable Casey’s to achieve that target less than halfway through that plan, Rebelez said.
“Acquisitions of this size and strategic fit do not come along very often, and we seized the opportunity to add these large, high-quality stores to our network,” he said. “The fit between Fikes and Casey’s is outstanding.”
CEFCO’s large-format stores average more than 4,800 square feet, comparable to the new stores that Casey’s builds today, he said. This will give Casey’s the ability to add kitchens to 85% of the stores “fairly easily as we eventually expand our pizza offering to Texas and the South,” he added. Twenty-five of the sites have car washes.
Because of the strength of the Lone Star brand in Texas, Casey’s decided not to rebrand those stores. But it intends to convert most of the CEFCO locations to Casey’s.
“With respect to rebranding, it would be our intention over the next couple of years as we are able to remodel [and] rebrand these stores to Casey’s,” Rebelez said. “There are a handful of stores that have some [quick-service restaurants] in there. They're under franchise agreements, and so we'll have to navigate that, and that's not unusual. We have other stores that we've acquired over the years that have that same situation. And we typically do not rebrand those to Casey’s until we've resolved the franchise QSR situation in those stores, but that would be our plan there.”
Casey’s also expects to add a total of approximately 500 new convenience stores over the three-year strategic plan from fiscal 2024 through fiscal 2026, Casey’s CFO Steve Bramlage said on the call. This includes 154 new units the chain added last year. “We will make some modest adjustments to our current new-build schedule to ensure that we can expeditiously capture the expected synergies from this transaction via remodeling,” he said. “Our current view is we'll probably invest somewhere in the neighborhood of $150 million of remodeling capital into these stores.”
In addition to the retail stores, the transaction includes a dealer network, a commissary to support the Texas stores and a fuel terminal in Waco, Texas.
When Casey’s acquired Buchanan Energy and its 94 Bucky’s stations and 79 dealer locations in 2021, it gained a wholesale fuels business, doing about 50 million gallons a year. The acquisition of Fikes Wholesale includes an approximately 80-million-gallons-a-year wholesale fuels business. “So we actually see [Fikes] as a complement to that, and we'll combine those two, [which will] really actually help us, I believe. … This would actually potentially be a bit of a reverse synergy for us,” Rebelez said.
The companies, which announced the deal last Friday, expect the transaction to close in the fourth quarter, subject to customary closing conditions and regulatory approval. The purchase price includes tax benefits valued at approximately $165 million for a net after-tax purchase price of $980 million.
Casey’s plans to finance the transaction through balance sheet cash and bank financing, it said. The net investment of $980 million represents an approximate multiple of 11 times CEFCO’s pro forma adjusted 2023 EBITDA, it said. The company also said it expects to achieve approximately $45 million in annual run-rate synergies upon the completion of kitchen installations in the acquired stores.
- Casey’s General Stores is No. 3 on CSP’s 2024 Top 202 ranking of U.S. c-store chains by store count. CEFCO is No. 37.
Fikes Wholesale. and CEFCO Convenience Stores began as a single “filling station” in Cameron, Texas, in 1952. The Temple, Texas-based company operates convenience stores in Alabama, Florida, Mississippi, and Texas.
Currently, Casey’s General Stores operates more than 2,650 convenience stores in the greater Midwest under the Casey’s and GoodStop brands and in Texas under the Lone Star brand. The company is the third-largest convenience-store retailer, the fourth-largest holder of liquor licenses and the fifth-largest pizza chain in the United States.
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