Casey';s Announces Agreement to Acquire 198 CEFCO Convenience Stores

Rhea-AI Summary

Casey's General Stores (Nasdaq: CASY) has announced an agreement to acquire Fikes Wholesale, owner of CEFCO Convenience Stores, for $1.145 billion in an all-cash transaction. The net after-tax purchase price is $980 million, considering tax benefits valued at approximately $165 million. This acquisition will add 198 retail stores and a dealer network to Casey's portfolio, expanding its presence in Texas and southern markets. The deal includes 148 stores in Texas and 50 stores in Alabama, Florida, and Mississippi, along with a fuel terminal and commissary. Casey's expects the acquisition to be accretive to EBITDA in the current fiscal year and projects $45 million in annual run-rate synergies upon completing kitchen installations in the acquired stores. The transaction is expected to close in Q4 2024, subject to regulatory approval.

Positive

• Expansion of Casey's footprint to nearly 2,900 stores
• Strategic entry into Texas market with 148 additional stores
• Acquisition expected to be accretive to Casey's EBITDA in the current fiscal year
• Projected $45 million in annual run-rate synergies
• Includes valuable assets: fuel terminal and commissary to support Texas stores

Negative

• Significant cash outlay of $1.145 billion for the acquisition
• Integration challenges and costs associated with merging operations
• Potential increase in debt to finance the transaction

Insights

Financial Analyst

Casey's General Stores' acquisition of Fikes Wholesale (CEFCO) for $1.145 billion is a significant move that expands their footprint in the southern U.S., particularly Texas. This deal, valued at a net $980 million after tax benefits, will add 198 retail stores and a dealer network to Casey's portfolio, bringing their total store count to nearly 2,900.

The acquisition's financials are noteworthy:

• Purchase price represents approximately 11x CEFCO's pro forma adjusted 2023 EBITDA
• Expected annual run-rate synergies of $45 million post-kitchen installations
• Transaction to be accretive to Casey's EBITDA in the current fiscal year

This strategic move aligns with Casey's stated goal of achieving top-quintile EBITDA growth through unit expansion. The deal not only accelerates their growth plan but also provides Casey's with valuable assets including a fuel terminal and commissary to support Texas operations.

From an investor's perspective, this acquisition offers both short-term and long-term benefits. The immediate EBITDA accretion is positive, while the synergies and expanded market presence in Texas and other southern states provide a solid foundation for future growth. However, investors should monitor the integration process and the realization of projected synergies, as these will be important for the deal's long-term success.

Market Research Analyst

Casey's acquisition of CEFCO marks a significant shift in the convenience store landscape, particularly in the southern United States. This move is strategically important for several reasons:

• Market Expansion: Casey's gains a strong foothold in Texas (148 new stores) and enters new markets in Alabama, Florida and Mississippi.
• Scale Benefits: Increasing to nearly 2,900 stores enhances Casey's purchasing power and operational efficiencies.
• Vertical Integration: Acquiring CEFCO's fuel terminal and commissary strengthens Casey's supply chain in the region.

The convenience store industry is highly competitive and this acquisition positions Casey's as a stronger player in the southern markets. It's worth noting that Casey's, known for its prepared foods (especially pizza), will likely introduce these offerings to the acquired stores, potentially driving additional revenue and differentiation in these new markets.

For investors, this move signals Casey's commitment to aggressive growth and market expansion. The 11% EBITDA multiple paid for CEFCO is in line with industry standards for quality assets, suggesting a fair valuation. The projected $45 million in annual synergies is substantial and, if realized, will significantly enhance the deal's value proposition.

However, investors should be aware of integration risks and the potential for cultural clashes as Casey's expands into new territories. The success of this acquisition will largely depend on Casey's ability to efficiently integrate CEFCO's operations and successfully implement its business model in these new markets.

The acquisition will expand Casey’s presence into the attractive Texas and southern markets, delivering accretive growth and creating value for shareholders, team members and guests

ANKENY, Iowa--(BUSINESS WIRE)-- Casey’s General Stores, Inc. (“Casey’s” or the “Company”) (Nasdaq: CASY), one of the leading convenience store chains in the United States, today announced an agreement to acquire Fikes Wholesale, Inc. (“Fikes”), owner of CEFCO Convenience Stores (“CEFCO”), in an all-cash transaction for $1.145 billion. The purchase price includes tax benefits valued at approximately $165 million for a net after-tax purchase price of $980 million.

Fikes Wholesale, Inc. and CEFCO Convenience Stores began as a single “filling station” in Cameron, Texas in 1952 and has grown to be a respected operator with stores in multiple states. Casey’s acquisition of Fikes will include 198 retail stores and a dealer network. The proposed transaction will increase Casey’s footprint to nearly 2,900 stores. The acquisition will bring 148 additional stores to Texas, which is a highly strategic market for Casey’s, as well as 50 stores in the southern states of Alabama, Florida, and Mississippi. In addition to the retail stores and dealer locations, the transaction includes a fuel terminal and a commissary to support the Texas stores.

“During our Investor Day presentation in June of 2023, we outlined our business strategy to achieve top-quintile EBITDA growth. One of the core pillars of the plan is to grow the number of units,” said Darren Rebelez, Board Chair, President and CEO of Casey’s. “This acquisition will allow Casey’s to accelerate our unit growth plan with high-quality assets that, along with our recent 22 store acquisition in northern Texas, will provide an expanded presence in Texas and allow us to continue to expand in the state and region.”

Raymond Smith, President of Fikes and CEFCO, highlighted the strategic alignment between the two convenience organizations. “The acquisition by Casey’s, especially given its reputation and shared values, is an exciting development for Fikes and our employees. I am happy that the CEFCO stores will join a top convenience retailer that will reinvest in the stores and eventually bring Casey’s pizza to many of our customers as well as provide professional opportunities for our employees. We believe Casey’s will be an excellent steward of the CEFCO experience that our loyal customers have come to expect.”

Rebelez added, “We expect the acquisition will create value for Casey’s shareholders in the near- and long-term and will be accretive to Casey’s EBITDA in the current fiscal year. Fikes is a well-run and well-respected company in our industry, and we look forward to welcoming the Fikes team to the Casey’s family. We could not be more excited about the future of our two organizations.”

The company plans to finance the transaction through balance sheet cash and bank financing. The net investment of $980 million represents an approximate multiple of 11 times CEFCO’s pro forma adjusted 2023 EBITDA. The Company expects to achieve approximately $45 million in annual run-rate synergies upon the completion of kitchen installations in the acquired stores.

The transaction is anticipated to close during the fourth quarter of calendar year 2024, subject to customary closing conditions and regulatory approval. Casey’s was advised by BMO Capital Markets Corp. as financial advisor and Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel, and Cleary Gottlieb Steen & Hamilton as antitrust legal counsel. Fikes was advised by BofA Securities as financial advisor and Bourland, Wall & Wenzel, P.C. as legal counsel.

Webcast Information

Casey’s will host a conference call to discuss the transaction at 10:00 a.m. Central Time, July 26^th. A live webcast of the call will be available on Casey’s website on the Investor Relations page at https://investor.caseys.com/events-and-presentations/default.aspx. For those unable to listen to the live broadcast, an audio replay will be available on the website for twelve months.

About Casey’s General Stores

Casey’s is a Fortune 500 company (Nasdaq: CASY) operating over 2,600 convenience stores. Founded more than 50 years ago, the company has grown to become the third-largest convenience store retailer and the fifth-largest pizza chain in the United States. Casey’s provides freshly prepared foods, quality fuel and friendly service at its locations. Guests can enjoy pizza, donuts, other assorted bakery items, and a wide selection of beverages and snacks. Learn more and order online at www.caseys.com, or in the mobile app.

About Fikes Wholesale, Inc. and CEFCO Convenience Stores

Fikes Wholesale, Inc. and CEFCO Convenience Stores were founded as a family-owned and operated business in 1952. Today, they operate convenience stores in Alabama, Florida, Mississippi, and Texas. Learn more at www.cefcostores.com.

Forward-Looking Statements

This communication contains statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including those related to the ability to consummate the transaction, the potential impact of consummation of the transaction on relationships with third parties, expectations for future periods, possible or assumed future results of operations, financial conditions, liquidity and related sources or needs, business and/or integration strategies, plans and synergies, supply chain, growth opportunities, and performance at the Company’s stores. There are a number of known and unknown risks, uncertainties, and other factors that may cause the Company’s actual results to differ materially from any results expressed or implied by these forward-looking statements, including but not limited to the execution of the Company’s strategic plan, the integration and financial performance of acquired stores, wholesale fuel, inventory and ingredient costs, distribution challenges and disruptions, the impact and duration of the conflict in Ukraine or other geopolitical disruptions, as well as other risks, uncertainties and factors which are described in the Company’s most recent annual report on Form 10-K and quarterly reports on Form 10-Q, as filed with the Securities and Exchange Commission and available on the Company’s website. Any forward-looking statements contained in this communication represent our current views as of the date of this communication with respect to future events, and the Company disclaims any intention or obligation to update or revise any forward-looking statements in this communication whether as a result of new information, future events, or otherwise.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240726504940/en/

Investor Relations Contact:

Brian Johnson (515) 446-6587

Brian.johnson@caseys.com

Media Relations Contact:

Katie Petru (515) 446-6772

Katie.petru@caseys.com

Source: Casey’s General Stores

FAQ

How many stores is Casey's acquiring from CEFCO?

Casey's is acquiring 198 retail stores from CEFCO Convenience Stores, along with a dealer network.

What is the purchase price for Casey's acquisition of CEFCO?

The purchase price is $1.145 billion, with a net after-tax purchase price of $980 million due to tax benefits valued at approximately $165 million.

When is the Casey's-CEFCO acquisition expected to close?

The transaction is anticipated to close during the fourth quarter of calendar year 2024, subject to customary closing conditions and regulatory approval.

How will the CEFCO acquisition affect Casey's (CASY) financial performance?

Casey's expects the acquisition to be accretive to its EBITDA in the current fiscal year and projects $45 million in annual run-rate synergies upon completing kitchen installations in the acquired stores.

Which new markets will Casey's (CASY) enter with the CEFCO acquisition?

The acquisition will expand Casey's presence in Texas with 148 additional stores, and enter new southern markets including Alabama, Florida, and Mississippi with 50 stores.