Arko to acquire Transit Energy Group for $375M

Arko Corp., a Fortune 500 holding company for Richmond-based convenience store chain GPM Investments LLC, announced Monday that GPM and some of its subsidiaries have agreed to acquire South Carolina-based Transit Energy Group for approximately $375 million plus the value of inventory.

Transit Energy Group has about 150 convenience stores and fuel supply rights to approximately 200 dealers. GPM will also acquire TEG’s bulk storage, distribution and transportation assets. Arko will have more than 1,530 convenience stores and more than 1,800 wholesale dealer sites once the transaction closes. The acquisition expands the company’s retail footprint into Alabama and Mississippi and will add about 285 million gallons of fuel to the 2 billion gallons Arko sells annually.

“Arko will add value to our stores with their diverse offerings, and ably serve our many loyal retail and wholesale customers,” TEG President and CEO Stephen Lattig said in a statement. “TEG would not be the success it is today if it were not for the dedication of its team members. We are excited that our team and company are joining a growing and dynamic organization.”

Energy investment firm ECP formed TEG, a privately held convenience store and wholesale fuel company in the Southeast United States, in July 2019. TEG owns stores in Alabama, Arkansas, Louisiana, Mississippi, Missouri, North Carolina, South Carolina and Tennessee, operating under the Flash Market brand and others.

Of the value of inventory, $50 million is deferred and payable in two annual payments of $25 million, either in cash or in shares of Arko’s common stock (subject to certain conditions) on the anniversaries of the closing.

Arko plans to finance about $60 million of the transaction. Oak Street Real Estate Capital, a division of Blue Owl Capital, expects to fund the remaining roughly $265 million as part of a $1.15 billion agreement announced in May 2021. Oak Street expects to acquire the real estate assets from TEG, and Arko expects to lease those assets from Oak Street. The incremental rent estimate is approximately $16 million.

Arko expects the acquisition to add about $18 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) annually, which it expects to become a $27 million annual run rate after the incremental rent payment to Oak Street.

“We believe this significant, accretive acquisition will drive strategic growth with the addition of an exceptional team, well-known stores and other assets to our family of community brands,” Arko President, Chairman and CEO Arie Kotler said in a statement. “A deal of this magnitude complements our core capabilities and will create long-term value for Arko stockholders and valuable synergies given our existing footprint and proven strategy of adding value to strong local brands while keeping jobs in place.”

Arko Corp. made the Fortune 500 list for the first time in 2022, ranking No. 498. Since 2013, the company has completed 21 acquisitions. In July, Arko acquired Fredericksburg-based Quarles Petroleum, one of the East Coast’s largest fleet-fueling cardlock operators, for $170 million.

Arko now has more than 11,000 employees across more than 3,000 locations. In 2021, the company reported a net income of $59.4 million.