Arko fuels up for more acquisitions

Arko, one of the largest U.S. convenience store operators, plans more M&A after closing its 23rd acquisition since 2013, its chairman and CEO Arie Kotler tells Axios.

Why it matters: The Richmond-based company is participating in what Kotler expects will be an active year of convenience store dealmaking.

Driving the news: Arko has completed the acquisition of Transit Energy Group for $370 million.

• The deal added 135 company-operated locations under the Corner Mart, Dixie Mart, Flash Market, Market Express, and Rose Mart banners in Alabama, Arkansas, Louisiana, Mississippi, Missouri, North Carolina, South Carolina and Tennessee.
• The deal also includes supplying fuel to approximately 190 independent dealers and a transportation business with 58 trucks and 78 tanker trailers.

Between the lines: Operational challenges such as increasing prices and labor are pushing smaller operators to sell their businesses.

• For example, Des Moines, Iowa-based Kum & Go is exploring a sale that could value the business at $2 billion.

Of note: Asked if it could consider a bid for Kum & Go, Kotler says Arko takes a look at everything but declined to comment further.

Details: Arko has about $1.25 billion in liquidity to apply toward deals, Kotler says.

• That includes about $300 million in cash on its balance sheet.
• The company is interested in buying anything from one location up to hundred of locations in regions such as the Southeast, Southwest, Mid-Atlantic and Northeast.
• Individual locations need to be between 2,000 and 3,000 square feet in size.

• Arko subsidiary GPM Investments secured a $1.15 billion real property commitment from Oak Street, a division of Blue Owl Capital, of which about $568 million remains.

The intrigue: In addition to providing financing, Oak Street also partners with Arko on acquisitions by acquiring the target's real estate.

• That reduces the money the convenience store operator must front to finance a deal since it is only buying the business.
• Arko then leases the real estate from Oak Street.

What's next: In what could also be transformative for the company, Arko is in the early stages of creating new food offerings it plans to roll out to all of its convenience stores across its many banners, Kotler says.

• Thus far, the company has deployed a number of Subway, Sbarro and Baskin-Robbins concepts under franchise agreements at its stores.