Applegreen acquires 42 service stations in South Carolina
Forecourt retailer will pay $5.4m for long lease, in deal expected to close later this year
Applegreen chief executive Bob Etchingham: the deal represents an ideal platform for the company to pursue its growth strategy. Photograph: Cyril Byrne
The deal to acquire the trade and certain assets of the US-based Bob Brandi Stations has been made in conjunction with an institutional real-estate investor who will acquire certain property assets of the business for $70.1 million. On Applegreen’s side the consideration of $5.4 million will be funded from existing resources, the company said on Thursday.
When the transaction is complete – expected to be in the fourth quarter of this year – Applegreen will enter into a long-term agreement with the same real-estate investor to lease the property assets. The company’s chief financial officer, Niall Dolan, said the initial term is 15 years with the possibility for four five-year renewal terms. Mr Dolan wouldn’t disclose any details on annual rental for the sites.
The current Bob Brandi business has 42 sites located around the city of Columbia in South Carolina. Some 34 sites are filling stations, and the remainder are stand-alone Burger King sites.
Asked about the company’s reasoning behind its US expansion, Bob Etchingham, the chief executive of Applegreen, said he was looking ahead to when their “growth opportunities plateau in Ireland”. He anticipates that that could happen in the next two to four years.
He pointed out that the US was “an easier place to penetrate” than Europe and their main focus was to keep the company’s “very rapid pace of growth going forward”.
Adjusted earnings before interest, taxes, depreciation and amortisation at the 42 sites is roughly $3 million, and Applegreen expects the deal to enhance earnings in 2018.
No infrastructure investment
Mr Etchingham said he doesn’t foresee a need for any infrastructure investment at the Bob Brandi sites. However, Applegreen may upgrade the group’s IT system.
The current owner of the business has committed to working with the new management team for the first 12 months to ensure an orderly transition to Applegreen.
“We consider the Brandi Group to be an excellent fit for our business given the attraction and convenience of its locations centred in the city of Columbia, together with the significant component of food-to-go offers that exists within the estate,” Mr Etchingham added.
“We believe that this acquisition represents an opportunity to establish a significant presence in this market while also providing the potential for us to leverage our retail experience in this sector to enhance the current offering.
“It also represents an ideal platform from which to further pursue our strategy for growth along the east coast of the US.”
Analysts at Davy Stockbrokers agreed, saying: “The acquisition of the Brandi Group in the US is a strategically important move for the Applegreen group . . . We think this will provide an excellent platform on which to further the group’s east coast-focused growth strategy.”
In a note to investors, analysts at Goodbody Stockbrokers were also positive, saying that today’s announcement illustrated the “attractive growth opportunities facing Applegreen across all three geographic markets”.
Asked about other areas of expansion, Mr Etchingham said its business model was very much about catering to the customer on the move and he doesn’t foresee a change in that model.
Despite their increasing focus on the US, Mr Dolan said “this doesn’t mean we’ve turned our attention away from the UK or Irish market. We’re firmly committed to growing both those markets.”