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Since the beginning of this year, 942 stores changed hands in 14 separate deals involving the sale of 20 or more convenience stores to another c-store chain. And, that doesn't include sales to companies outside the c-store business, such as last month's acquisition of 162 Travel Centers of America locations to Hospitality Properties Trust, a Newton, Mass.-based real estate firm.
The figure also doesn't include the scores of individual c-stores being sold to new independent dealers as several of the big oil companies continue to sell off stores.
It seems that although the time may never be better to sell a store, retailers from large, multinational chains like 7-Eleven and Alimentation Couche-Tard to regional chains are not shying away from lucrative deals to grow their businesses through acquisition.
The largest acquisition, of course, was 7-Eleven's purchase in August of White Hen's 261 stores for $35 million. The deal marked the largest acquisition in eight years for the industry's largest retailer and its first under new CEO Joseph DePinto, who told Convenience Store News that strategic acquisitions, along with new builds and franchisee conversions, would be part of the Dallas-based retailer's three-pronged growth strategy going forward.
Driving the acquisition binge is a trend noted prominently in CSNews Industry Report 2006: the volatility of gasoline prices is forcing retailers to focus on their stores, where they derived 64.2 percent of their gross margin dollars last year.
"With the squeezing of fuel profits, our focus has been on maximizing inside sales," said Jay Patel, CEO of Florida-based Diamond Oil, which last month expanded into Tennessee after successfully bidding $18.1 million for 28 Kwik Sak c-stores formerly owned by Purvi Petroleum. "With fuel margins so thin that you have more profit in a cup of coffee than 5 gallons of gas, it doesn't take long to figure out where your priorities should be."
I have often wondered what factors lead to industry-wide consolidation. Here, gas prices have made convenience store operators redefine their core business. Could anyone outside of this industry predicted this trend?
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