8-K: CrossAmerica Partners Amends Credit Agreement to Facilitate Applegreen Acquisition

CrossAmerica Partners LP has amended its credit agreement to accommodate the acquisition of assets from Applegreen, including lease terminations at 59 locations for $16.9 million.

Summary

• CrossAmerica Partners LP has amended its credit agreement to facilitate the acquisition of certain assets from Applegreen Midwest LLC and Applegreen Florida, LLC.
• The amendment modifies the definition of Consolidated EBITDA to allow for the addback of lease termination expenses related to the Applegreen acquisition.
• The company will acquire assets by terminating existing lease agreements at 59 locations for a total consideration of $16.9 million, plus the cost of inventory at those locations.
• The existing leases with Applegreen could have been extended to 2049 and 2048, respectively, including all renewal options.
• The lease terminations are expected to occur during the first and second quarters of 2024, subject to customary closing conditions.
• The amendment to the credit agreement will not become effective until at least one transaction under the Applegreen Purchase Agreement closes.

Sentiment

Score: 7

Explanation: The document outlines a strategic acquisition and necessary financial adjustments, which are generally positive for growth, but the costs associated with lease terminations temper the overall sentiment.

Positives

• The amendment to the credit agreement provides financial flexibility for the Applegreen acquisition.
• The acquisition of 59 locations will expand CrossAmerica Partners' asset base.
• The addback of lease termination expenses to Consolidated EBITDA will improve the company's financial metrics.

Negatives

• The company is incurring $16.9 million in lease termination expenses, plus the cost of inventory, which will impact cash flow.
• The amendment to the credit agreement is contingent on the closing of at least one transaction under the Applegreen Purchase Agreement.

Risks

• The Applegreen acquisition is subject to customary closing conditions, which could delay or prevent the transaction.
• The company is incurring significant lease termination expenses, which could impact profitability.
• The amendment to the credit agreement is contingent on the closing of at least one transaction under the Applegreen Purchase Agreement.

Future Outlook

The lease terminations are expected to occur during the first and second quarters of 2024, subject to customary closing conditions.

Industry Context

This acquisition and credit agreement amendment reflect a strategic move by CrossAmerica Partners to expand its operations through acquisitions, which is a common strategy in the fuel distribution and retail industry.

Comparison to Industry Standards

• Acquiring existing locations and terminating leases is a common strategy for growth in the convenience store and fuel distribution industry.
• Companies like Sunoco LP and Global Partners LP also use acquisitions to expand their networks.
• The $16.9 million lease termination cost is a significant expense, but it is not unusual for acquisitions of this scale.
• The amendment to the credit agreement to allow for addbacks of lease termination expenses is a common practice to maintain financial flexibility during acquisitions.

Stakeholder Impact

• Shareholders may view the acquisition as a positive step for growth, but will also be aware of the associated costs.
• Employees at the acquired locations will likely be integrated into CrossAmerica Partners' operations.
• Customers at the acquired locations will experience a change in ownership and potentially branding.
• Suppliers will need to adjust to the new ownership structure.

Next Steps

• The company will proceed with the closing of the Applegreen acquisition, which is expected to occur in the first and second quarters of 2024.
• The company will finalize the amendment to the credit agreement upon the closing of at least one transaction under the Applegreen Purchase Agreement.

Key Dates

Keywords

Applegreen Acquisition, Credit Agreement, Lease Termination, Consolidated EBITDA, Asset Acquisition, CrossAmerica Partners, Financial Amendment