Arko mulls sale of convenience store operations in reversal of strategy, sources say

Arko.

17/09/2024 21:23

(Adds share move in paragraph 4)
    By Abigail Summerville
       NEW YORK, Sept 17 (Reuters) - Store operator Arko
 ARKO.O  is planning to divest its convenience store operations
in a deal that could be valued at around $2 billion, as it looks
to abandon a yearslong expansion strategy after grappling with a
slowdown in sales from the store business, people familiar with
the matter told Reuters.
    Richmond, Virginia-based Arko is working with investment
bankers at Citigroup to sell the package of about 1,500 stores
that it currently operates, the sources said, requesting
anonymity as the discussions are confidential. 
    A deal would leave Arko with its fuel distribution business
and unwind its dealmaking spree that turned it into one of the
largest U.S. convenience store operators since its founding in
2003. 
    Arko's shares jumped nearly 14% on the news, before paring
some gains to close at $6.65, giving the company a market value
of about $770 million.  
    Potential buyers include other convenience store operators,
as well as private equity firms, who have submitted initial bids
for the stores, the sources said, cautioning that a deal is not
guaranteed. 
    The stores generate around $300 million of annual earnings
before interest, taxes, depreciation and amortization, the
sources said. 
    The company is betting that it will achieve a higher
valuation as a standalone fuel distributor, the sources said.
Arko currently supplies fuel to more than 1,800 independent
dealer sites and roughly 300 unmanned fleet fueling locations.
    Citi and Arko declined to comment. 
    The latest moves come at a time when convenience store
operators are facing a slowdown in growth, as high inflation and
rising living costs are forcing shoppers to cut back on spending
on groceries and staples. 
    "We continue to see pressure on consumers as they struggle
with inflation and elevated prices for everyday goods,
especially in markets with a large percentage of lower-income
consumers. Consumers have been hesitant in their spending and
their purchases have remained suppressed despite multiple summer
promotions," Arko CEO Arie Kotler said in a recent post-earnings
conference call. 
    Arko, which listed its shares in 2020 following a merger
with a blank-check company and is valued at roughly $1.7 billion
including debt, has struggled as a public company as its shares
have lost more than 20% of their value since the start of the
year.   
    In its most recent quarter, Arko posted a decline in net
profit, as it was hurt by lower same-store sales. Its
merchandise revenue fell about 2% to $474.2 million. 
    Arko's moves mirror other store operators who have struggled
with a slowdown in consumer spending. Earlier this year, Sunoco
 SUN.N  agreed to sell 204 stores to 7-Eleven in a deal worth $1
billion, as the company plans to focus on its fuel distribution
business. 

 (Reporting by Abigail Summerville in New York; Editing Anirban
Sen and Aurora Ellis)
 ((abigail.summerville@thomsonreuters.com;))