8-K: Casey's to Acquire CEFCO Convenience Stores for $1.145 Billion, Expanding Texas Footprint

Casey's General Stores has announced an agreement to acquire Fikes Wholesale, Inc., including CEFCO Convenience Stores, for $1.145 billion in cash, significantly expanding its presence in Texas and the southern United States.

Summary

• Casey's General Stores will acquire Fikes Wholesale, Inc., which includes CEFCO Convenience Stores, for $1.145 billion in an all-cash transaction.
• The net after-tax purchase price is estimated at $980 million, accounting for approximately $165 million in tax benefits.
• The acquisition includes 198 retail stores and a dealer network, increasing Casey's total store count to nearly 2,900.
• This deal will add 148 stores in Texas and 50 stores in Alabama, Florida, and Mississippi.
• The transaction also includes a fuel terminal and a commissary to support the Texas stores.
• Casey's expects the acquisition to be accretive to EBITDA in the current fiscal year.
• The net investment of $980 million represents an approximate multiple of 11 times CEFCO's pro forma adjusted 2023 EBITDA.
• Casey's anticipates achieving approximately $45 million in annual run-rate synergies after completing kitchen installations in the acquired stores.
• The transaction is expected to close in the fourth quarter of calendar year 2024, pending customary closing conditions and regulatory approval.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment, highlighting the strategic benefits and expected financial gains from the acquisition. The language used is optimistic and forward-looking, indicating confidence in the deal's success.

Positives

• The acquisition will significantly expand Casey's presence in the strategic Texas market and the southern states.
• The deal is expected to be accretive to Casey's EBITDA in the current fiscal year.
• Casey's anticipates achieving $45 million in annual run-rate synergies.
• The acquisition includes a fuel terminal and a commissary, providing additional infrastructure.
• The transaction aligns with Casey's strategic plan to grow the number of units.

Risks

• The document mentions risks related to the execution of Casey's strategic plan, integration and financial performance of acquired stores, wholesale fuel, inventory and ingredient costs, distribution challenges and disruptions, and geopolitical disruptions.
• The transaction is subject to customary closing conditions and regulatory approval, which could potentially delay or prevent the deal from closing.

Future Outlook

Casey's expects the acquisition to create value for shareholders in the nearand long-term and to be accretive to EBITDA in the current fiscal year. The company also anticipates achieving approximately $45 million in annual run-rate synergies upon the completion of kitchen installations in the acquired stores.

Management Comments

• Darren Rebelez, Board Chair, President and CEO of Casey's, stated that the acquisition will allow Casey's to accelerate its unit growth plan with high-quality assets.
• Raymond Smith, President of Fikes and CEFCO, expressed excitement about the acquisition by Casey's, highlighting the strategic alignment between the two organizations.
• Rebelez added that they look forward to welcoming the Fikes team to the Casey's family.

Industry Context

This acquisition reflects a trend of consolidation in the convenience store industry, with larger players seeking to expand their geographic footprint and market share. Casey's is leveraging this acquisition to strengthen its position in the competitive Texas market and expand into other southern states.

Comparison to Industry Standards

• The acquisition multiple of 11 times CEFCO's pro forma adjusted 2023 EBITDA is within the range of recent transactions in the convenience store sector, though specific multiples can vary based on factors such as location, store quality, and growth potential.
• The expected $45 million in annual run-rate synergies is a common goal in acquisitions of this type, as companies seek to leverage economies of scale and operational efficiencies.
• Comparable acquisitions in the convenience store space include 7-Eleven's acquisition of Speedway and Couche-Tard's acquisition of CST Brands, though the size and scope of those deals were larger.

Stakeholder Impact

• Shareholders are expected to benefit from the accretive nature of the acquisition and the potential for long-term value creation.
• Employees of CEFCO are expected to have professional opportunities within the larger Casey's organization.
• Customers of CEFCO are expected to experience a continuation of the CEFCO experience, with the addition of Casey's pizza and other offerings.

Next Steps

• The transaction is subject to customary closing conditions and regulatory approval.
• Casey's plans to finance the transaction through balance sheet cash and bank financing.
• Casey's will integrate the acquired stores and implement kitchen installations to achieve synergies.

Key Dates

Keywords

acquisition, convenience stores, CEFCO, Casey's, retail, Texas, EBITDA, synergies, fuel, expansion