Casey’s CEFCO acquisition builds on Texas expansion

Photo courtesy of Fikes Wholesale/CEFCO Convenience Stores

The pending acquisition of Fikes Wholesale Inc., owner of 198 CEFCO Convenience Stores, by Casey’s General Stores Inc. in an all-cash transaction valued at $1.145 billion opens new territory for the regional convenience store retailer not only in Texas but also in several states in the South.

The CEFCO deal will increase Casey’s total retail footprint by 7% to nearly 2,900 convenience stores. It will bring 148 stores to Texas. It will also add 50 stores in the South, with 27 in Florida, 13 in Alabama and 10 in Mississippi — all new states for the chain.

Ankeny, Iowa-based Casey’s entered Texas — its 17th state — last November after acquiring 22 Lone Star Food Stores from W. Douglass Distributing Ltd.

Seventh heaven

“This transaction is highly strategic and will help the company accelerate its three-year strategic plan,” said Darren Rebelez, chairman, president and chief executive officer of Casey’s, during a conference call announcing the CEFCO deal. “This acquisition will rapidly expand Casey’s presence in Texas, a highly attractive market for Casey’s.”

Once the deal is complete, Casey’s will have 170 stores in Texas, making it the chain’s seventh-largest state. The CEFCO stores “are not in the big cities … but in the smaller towns,” Rebelez said, but in the middle of a “triangle” from Dallas to San Antonio to Houston.

The Florida and Alabama stores are essentially in the Panhandle market, and all are located in places that are “very consistent geographically with Casey’s,” he said.

Panhandle Service

“We really like what we’re seeing (in the Florida Panhandle) from a competitive standpoint,” he said. “It’s been more of an expansion market for CEFCO, so a lot of those stores have come in the last few years. And there’s a lot of legacy assets there at this point. So we think we’re really, really well-positioned from a competitive standpoint. We know there are other competitors coming in, none of them are for us, we’re very familiar with them, so we feel really good about that geography in particular.”

Casey’s Joplin, Mo., distribution center will supply stores in Texas. “We’re evaluating how we want to serve stores in Florida, Alabama and Mississippi” in terms of distribution, Rebelez said.

Casey’s shared its current three-year strategic plan in June 2023 and has committed to adding at least 350 new units by fiscal 2026. The agreement with CEFCO, along with strong growth in fiscal 2024, will enable Casey’s to achieve that goal in less than half of that plan, Rebelez said.

“Acquisitions of this size and strategic fit don’t come around very often, and we seized the opportunity to add these large, high-quality stores to our network,” he said. “The fit between Fikes and Casey’s is excellent.”

CEFCO’s large-format stores average more than 4,800 square feet, which is comparable to the new stores Casey’s is building today, he said. That will allow Casey’s to add kitchens to 85% of its stores “pretty easily, because we’ll eventually expand our pizza offerings to Texas and the South,” he added. Twenty-five of those locations have car washes.

Due to the strength of the Lone Star brand in Texas, Casey’s has decided not to change the name of these stores. But it does intend to convert most of the CEFCO locations to Casey’s.

“As far as rebranding, our intention is in the next few years, as we are able to remodel (and) rebrand those stores to Casey’s,” Rebelez said. “There are a few stores that have some (quick-service restaurants) in there. They are in franchise agreements, so we will have to work through that, and that is not uncommon. We have other stores that we have acquired over the years that are in the same situation. And we typically do not rebrand them to Casey’s until we have resolved the QSR franchise situation in those stores, but that would be our plan.”

Casey’s also expects to add about 500 new convenience stores in total over the three-year strategic plan from fiscal 2024 to fiscal 2026, Casey’s Chief Financial Officer Steve Bramlage said on the call. That includes 154 new units the chain added last year. “We will make some modest changes to our current new construction schedule to ensure that we can quickly capture the expected synergies from this transaction through redevelopment,” he said. “Our current view is that we will likely invest about $150 million of capital to redevelopment those stores.”

In addition to the retail stores, the transaction includes a dealership network, a commissary supporting the Texas stores, and a fuel terminal in Waco, Texas.

When Casey’s acquired Buchanan Energy and its 94 Bucky’s stations and 79 dealership locations in 2021, it gained a wholesale fuel business, selling about 50 million gallons a year. The acquisition of Fikes Wholesale includes a wholesale fuel business of about 80 million gallons a year. “So we really see (Fikes) as a complement to that and we’ll combine the two, (which) will really help us, I think. … That would potentially be a reverse synergy for us,” Rebelez said.

The companies, which announced the deal last Friday, expect the transaction to close in the fourth quarter, subject to customary closing conditions and regulatory approvals. The purchase price includes tax benefits of approximately $165 million, resulting in a net after-tax purchase price of $980 million.

Casey plans to fund the transaction with cash on its balance sheet and bank financing, it said. The net investment of $980 million represents an approximate multiple of 11 times CEFCO’s pro forma 2023 adjusted EBITDA, it said. The company also said it expects to realize approximately $45 million in annual synergies at a running rate once the kitchen installation is complete in the acquired stores.

• Casey’s General Stores is No. 3 on the list CSP 2024 Ranking of the Top 202 U.S. c-store chains by number of stores. CEFCO is in 37th place.

Fikes Wholesale. and CEFCO Convenience Stores began as a single “gas station” in Cameron, Texas, in 1952. The Temple, Texas-based company operates convenience stores in Alabama, Florida, Mississippi and Texas.

Casey’s General Stores currently operates more than 2,650 convenience stores in the Greater Midwest under the Casey’s and GoodStop brands and in Texas under the Lone Star brand. The company is the third-largest convenience store retailer, the fourth-largest liquor licensee, and the fifth-largest pizza chain in the United States.

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Greg Lindenberg has been covering convenience store news and the c-store and gas station industries for more than a quarter century. He specializes in mergers and acquisitions (M&A) news.

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