Arko Considers Selling Convenience Store Business

NEW YORK: Store operator Arko plans to shed its convenience stores in a deal that could be valued at about $2 billion, as the company looks to abandon a years-long expansion strategy after struggling with declining sales in the grocery industry, people familiar with the matter said.

Richmond, Virginia-based Arko is working with investment bankers from Citigroup to sell a stake of about 1,500 stores it currently manages, said the sources, who asked not to be identified because the talks are confidential.

The transaction would allow Arko to retain its existing fuel distribution business and complete a series of transactions that have made it one of the largest convenience store operators in the United States since its founding in 2003.

Arko shares rose nearly 14% on the news before falling slightly 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 that have made preliminary offers to acquire the stores, the sources said, cautioning that there is no guarantee of a deal.

According to sources, the stores generate annual revenue of about $300 million before interest, taxes, depreciation and amortization.

The company expects to command a higher valuation as a standalone fuel distributor, the sources said.

Arko currently supplies fuel to more than 1,800 independent dealerships and about 300 unmanned fleet fueling points. Citi and Arko declined to comment.

The latest moves come as convenience store operators grapple with slowing growth, while high inflation and rising living costs force shoppers to cut back on groceries and essentials.

“We continue to see pressure on consumers as they grapple with inflation and high prices for everyday goods, particularly in markets with a large proportion of lower-income consumers.

“Consumers were hesitant about spending and their purchases remained subdued, despite numerous summer promotions,” Arko CEO Arie Kotler said during a recent conference call after the results were announced.

Arko, which went public in 2020 after merging with a blank-check company and is valued at about $1.7 billion including debt, has struggled as a public company, with shares having lost more than 20% of their value since the beginning of the year.

Arko reported a drop in net profit in the latest quarter as it suffered from lower same-store sales. Merchandise revenue fell about 2% to $474.2 million.

Arko’s moves mirror those of other store operators grappling with a slowdown in consumer spending. Earlier this year, Sunoco agreed to sell 204 7-Eleven stores in a deal worth $1 billion as the company plans to focus on its fuel distribution business. — Reuters