|9 Months Ended|
Sep. 30, 2022
|Business Combinations [Abstract]|
On July 22, 2022, the Company consummated its acquisition of certain assets (the “Quarles Acquisition”) from Quarles Petroleum, Incorporated (“Quarles”), including:
121 proprietary Quarles-branded cardlock sites and management of 63 third-party cardlock sites for fleet fueling operations;
46 independent dealer locations, including certain lessee-dealer sites; and
a small transportation fleet.
The total consideration for the Quarles Acquisition as set forth in the purchase agreement was approximately $170 million plus the value of inventory on the closing date. The Company financed $40 million of the purchase price with the Capital One Line of Credit (as defined in Note 12 to the annual financial statements) and Oak Street Real Estate Capital Net Lease Property Fund, LP (“Oak Street”), under the standby real estate purchase, designation and lease program agreement with Oak Street, dated as of May 31, 2021 (as amended, the “Program Agreement”), paid approximately $129.3 million of the consideration for fee simple ownership in 39 sites. At the closing, pursuant to the Program Agreement, the Company amended one of its master leases with Oak Street to add the sites Oak Street acquired in the transaction under customary lease terms. For accounting purposes, the transaction with Oak Street was treated as a sale-leaseback, and the Company recorded right-of-use assets and operating lease liabilities of approximately $81.8 million in connection therewith.
The details of the Quarles Acquisition were as follows:
The initial accounting treatment of the Quarles Acquisition reflected in these interim financial statements is provisional as the Company has not yet finalized the initial accounting treatment of the business combination, and in this regard, has not finalized the valuation of some of the assets and liabilities acquired and the goodwill resulting from the Quarles Acquisition, mainly due to the limited period of time between the Quarles Acquisition closing date and the date of these interim financial statements. Therefore, some of the financial information presented with respect to the Quarles Acquisition in these interim financial statements remains subject to change.
The Company included identifiable tangible assets and identifiable liabilities at their fair value based on the information available to the Company’s management on the Quarles Acquisition closing date, including, among other things, an evaluation performed by external consultants for this purpose. On the closing date of the Quarles Acquisition, the useful life of the wholesale fuel supply contracts was 5.25 years, the useful life of the contracts related to the third-party cardlock sites was two years, and the useful life of the customer relationships related to proprietary fuel cards that give customers access to a nationwide network of fueling sites was 20 years.
The Company’s preliminary accounting treatment of this business combination resulted in no goodwill being recorded.
Acquisition-related costs amounting to approximately $0.9 million and $1.6 million have been excluded from the consideration transferred and have been recognized as an expense within the other expenses, net line in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, respectively. No acquisition-related costs were recognized for the three and nine months ended September 30, 2021.
Results of operations for the Quarles Acquisition for the period subsequent to the acquisition closing date were reflected in the condensed consolidated statement of operations for the three and nine months ended September 30, 2022. For the period from the acquisition closing date through September 30, 2022, the Company recognized $142.4 million in revenues and $6.2 million in net income related to the Quarles Acquisition.
Impact of Acquisitions (unaudited)
The unaudited supplemental pro forma financial information was prepared based on the historical information of the Company and the acquired operations and gives pro forma effect to the acquisitions using the assumption that the Quarles Acquisition, the acquisition of 60 ExpressStop sites on May 18, 2021 and the acquisition of 36 Handy Mart sites on November 9, 2021 had occurred at the beginning of each period presented below. The unaudited supplemental pro forma financial information does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the acquisitions or any integration costs. The unaudited pro forma financial information is not necessarily indicative of what the actual results of operations would have been had the acquisitions occurred at the beginning of each period presented below nor is it indicative of future results.
Pending Acquisition – Transit Energy Group, LLC
On September 9, 2022, the Company entered into a purchase agreement to acquire from Transit Energy Group, LLC (“TEG”) (i) approximately 150 self-operated convenience stores and gas stations, (ii) fuel supply rights to approximately 200 independent dealer locations, (iii) a commercial, government, and industrial business, including certain bulk plants, and (iv) certain distribution and transportation assets, all in the Southeastern United States (the “TEG Acquisition”).
The purchase price for the TEG Acquisition is approximately $375 million plus the value of inventory at the closing, of which $50 million will be deferred and payable in two annual payments of $25 million, which the Company may elect to pay in either cash or, subject to the satisfaction of certain conditions, shares of common stock (the “Installment Shares”), on the first and second anniversaries of the closing. Pursuant to the purchase agreement, at closing, the parties have agreed to enter into a registration rights agreement, pursuant to which the Company will agree to prepare and file a registration statement with the SEC, registering the Installment Shares, if any, for resale by TEG.
The Company intends to finance from its own sources approximately $60.0 million of the cash consideration payable at closing of the TEG Acquisition plus the value of inventory and other closing adjustments. Oak Street, under the Program
Agreement, has agreed to pay the remaining consideration for the fee simple ownership in 106 sites, which the Company will lease from Oak Street.
The closing of the TEG Acquisition is subject to fulfillment of conditions precedent. There can be no assurances that the TEG Acquisition will be consummated on the foregoing terms, if at all.
Pending Acquisition – Pride Convenience Holdings, LLC
On October 19, 2022, the Company entered into a purchase agreement with Pride Parent, LLC (“Seller”) to acquire all of the issued and outstanding membership interests in Pride Convenience Holdings, LLC (“Pride”), which operates 31 convenience stores and gas stations in Connecticut and Massachusetts (the “Pride Acquisition”).
The total purchase price for Pride is approximately $230.0 million plus the value of inventory at the closing and subject to certain other closing adjustments. The Company intends to finance from its own sources approximately $28.0 million of the cash consideration plus the value of inventory and other closing adjustments with the balance of the consideration being paid directly to the Seller by Oak Street in accordance with the Program Agreement. Under this arrangement, Oak Street or its affiliates has agreed to pay the remaining consideration to acquire the entity holding certain real estate assets of Pride substantially concurrently with the closing of the Pride Acquisition. The Company expects to lease the real estate assets from Oak Street.
The closing of the Pride Acquisition is subject to fulfillment of conditions precedent. There can be no assurances that the Pride Acquisition will be consummated on the foregoing terms, if at all.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef