7-Eleven wins bid to acquire Speedway

[arizonaguy]

It looks like Seven & i Holdings Co. will be the winner.

https://www.bloomberg.com/news/articles ... 21-billion

[storewanderer]

Too bad, I would have much rather seen Circle K as the buyer.

This is still a high valuation and the same valuation that was assessed before the Coronavirus thing made 7-Eleven pull its first bid.

Marathon made a real mistake selling Speedway.

It will be interesting to see how long the Speedway brand hangs around. I don't think 7-Eleven has finished rebranding Stripes or A-Plus sites purchased 3 years ago yet... they haven't even finished rebranding all of the former Valero Corner Stores they bought in CA like 5 years ago... still a few around Salinas and Fresno with Valero fuel and running a no-name store with 7-Eleven merchandise and promotions. How hard is it to put a sign up? Pretty hard for 7-Eleven. The only positive is those they still run as Valero still have one price for gas and it is quite competitive (same price cash/credit) whereas once they convert to 7-Eleven on those former Valero sites, they go with 76 brand fuel for some reason, then they do a .10 credit surcharge per gallon.

[storewanderer]

If I am doing the math right:

7-Eleven buys 3,900 Speedway sites for $21 billion: 21,000,000,000/3,900 = $5.4 million per Speedway site

2018: 7-Eleven buys 1,030 Sunoco sites for $3.3 billion: 3,300,000,000/1,030 = $3.2 million per Sunoco site

2014: Speedway buys 1,256 Hess sites for $2.8 billion: 2,800,000,000/1,256 = $2.2 million per Hess site

This valuation is nuts and 7-Eleven seems to be way overpaying but they are obviously desperate for a deal and desperate to show growth in the US. 7-Eleven is playing catch up for not acquiring as actively in the 00's. The real issue with 7-Eleven is its network being primarily franchised and primarily old run down sites that are in poor neighborhoods, poor condition, dirty, and overpriced. 7-Eleven has been being chased out of markets and relegated only to poor low traffic locations when markets have penetration of legitimate c-store operators with larger newer sites like Quik Trip, Wawa, Sheetz, newer Circle Ks, and others. Speedway was in a similar position, but countered this by running stores with competitively priced products despite not having the newest stores.

2016: Circle K buys 2,000 Corner Store sites for $4.4 billion = $2.2 million per Corner Store site

[jamcool]

Supposedly Marathon will still supply fuel to the former Speedway locations. Also what happens to AM/PM in SoCal and Arizona?

[storewanderer]

Supposedly Marathon will still supply fuel to the former Speedway locations. Also what happens to AM/PM in SoCal and Arizona?

Marathon keeps Arco. BP still controls AM/PM. I wonder if Marathon will come up with another c-store brand to franchise out to dealers or what they are planning.

This was not how it was intended to go, when Marathon and Andeavor merged. The old CEO of Marathon who had 45 years with the company understood the importance of an integrated operation and Speedway was a key component of that. Unfortunately activist investors wanted Speedway sold, that old CEO stopped them once, but the second time they got their way, he was forced out, and Speedway was sold.

Speedway is a loss. They were/are a very competitive c-store operator. Loss of competition is never good.

[jamcool]

I imagine there is a lot of overlap between 7-11 and Speedway in the Midwest and East Coast which the FTC would force them to sell off. Plus 7-11 seems to be in a constant battle with its franchisees who have their own organization.

[pseudo3d]

If I am doing the math right:

7-Eleven buys 3,900 Speedway sites for $21 billion: 21,000,000,000/3,900 = $5.4 million per Speedway site

2018: 7-Eleven buys 1,030 Sunoco sites for $3.3 billion: 3,300,000,000/1,030 = $3.2 million per Sunoco site

2014: Speedway buys 1,256 Hess sites for $2.8 billion: 2,800,000,000/1,256 = $2.2 million per Hess site

This valuation is nuts and 7-Eleven seems to be way overpaying but they are obviously desperate for a deal and desperate to show growth in the US. 7-Eleven is playing catch up for not acquiring as actively in the 00's. The real issue with 7-Eleven is its network being primarily franchised and primarily old run down sites that are in poor neighborhoods, poor condition, dirty, and overpriced. 7-Eleven has been being chased out of markets and relegated only to poor low traffic locations when markets have penetration of legitimate c-store operators with larger newer sites like Quik Trip, Wawa, Sheetz, newer Circle Ks, and others. Speedway was in a similar position, but countered this by running stores with competitively priced products despite not having the newest stores.

2016: Circle K buys 2,000 Corner Store sites for $4.4 billion = $2.2 million per Corner Store site

Buying Speedway is overpriced but many of the Corner Stores that Circle K bought weren't good stores (1,200 sq. ft. "under the canopy" stores). The real problem with 7-Eleven is not expanding in markets that they had entered. My town still has two TETCO stores that were acquired at least six years and became 7-Eleven stores in all but name (really, how hard it is to change a sign?), and even since then one has changed gas brands from Texaco to Chevron (not the 7-Eleven name); meanwhile, they sold off many Stripes unbuilt sites.

[storewanderer]

I imagine there is a lot of overlap between 7-11 and Speedway in the Midwest and East Coast which the FTC would force them to sell off. Plus 7-11 seems to be in a constant battle with its franchisees who have their own organization.

I was thinking there is overlap in a lot of major cities in the Midwest and East; Florida too... so we will see how this plays out. Maybe someone buys a block of stations and keeps using the Speedway brand.

7-Eleven has been able to re-franchise out various former Valero Corner Store and A-Plus locations so despite the ongoing issues they have they seem to always be able to find new franchisees for their sites.

What I find interesting is even when 7-Eleven builds a new location they put it up for a franchisee to run immediately.

Speedway was the 1st or 2nd largest chain of corporate operated convenience stores in the USA (Circle K being the other top one). Why did 7-Eleven want this consistent and corporate operated chain which is the polar opposite of what 7-Eleven's franchisee operated and inconsistent US operation is?

[steps]

Here in SoCal, in the last 1-2 years I've seen 5 new 7-11's open with Sinclair gas stations. Sinclair is a brand I'm not familiar with but the gas is MUCH cheaper than anything near by, sometimes by .40 or more.

I've generally noticed the 7-11 here are close by each other (a mile or so apart) but all are very busy during the morning and "after work" hours. All that I've been too are very well run and seem to do a good volume.

These stores/stations are located in very busy and highly visible locations.

[storewanderer]

Here in SoCal, in the last 1-2 years I've seen 5 new 7-11's open with Sinclair gas stations. Sinclair is a brand I'm not familiar with but the gas is MUCH cheaper than anything near by, sometimes by .40 or more.

I've generally noticed the 7-11 here are close by each other (a mile or so apart) but all are very busy during the morning and "after work" hours. All that I've been too are very well run and seem to do a good volume.

These stores/stations are located in very busy and highly visible locations.

I don't think Sinclair is a brand 7-Eleven supports (it doesn't show on SEIFuels.com as one of their supported fuel brands) so those must be independently owned sites that in turn buy a 7-Eleven franchise and use it in their store. Those stores are probably somewhat different from a typical 7-Eleven that is on real estate controlled by the corporation but operated by a franchisee which is their usual model. These locations usually are not on 7-Eleven systems and can order around 7-Eleven's supply chain. So to give you an example let's say one of these 7-Elevens decided it wanted to sell soft serve ice cream (not a typical 7-Eleven item). It could buy the equipment and do that. This is not their typical model used in the US.

Typical 7-Eleven model is 7-Eleven owns real estate, owns all equipment in store, and controls gas operation. They also have a supply chain set up that these locations are required to order from. They then "franchise" the store out to an independent operator who basically rents the space from the corporation, plus pays a royalty on sales, and is able to price items as they wish but has to run all transactions, payroll, ordering, etc. through 7-Eleven. It is legally questionable especially in California if these people are really independent franchisees, or actually employees of the corporation given how much control the corporation has over their operation. They are also compelled to participate in all 7-Eleven promotions and get back peanuts as reimbursement (they may give a free item worth $1.29 but only get back say 40 cents or some lowball amount). 7-Eleven did finally fix their cash registers so sale prices apply automatically. About 3 years ago to get a sale price at 7-Eleven the cashier had to scan a coupon code after scanning the items (this was a scan down so they got reimbursed for it, but not reimbursed by as much as they were discounting)- and you had to ask for that sale price every time or you would get charged full price. Now they finally have it so after the items scan the sale price automatically links. However, there is still an issue with their Rewards program. For instance when an item is free with 7Rewards the location near my house, the guy inside on swing shift, who is the brother of the franchisee, always says the system is "DOWN" when I pull up the 7Rewards. But there is a phone number entry on the customer facing register screen so I then enter my number and oh surprise it works. So when it zeros out he goes "oh it must be fixed now." No buddy, you have been falsely denying people use of the 7Rewards all day hoping to not give free/discounted items. Franchisee has no control at all over the gas operation and just gets a small commission per gallon of gas sold (a few cents per gallon and recently they were trying to cut to 1 cent per gallon).

Back to the ice cream example let's say one of the 7-Elevens on real estate controlled by the corporation decided it wanted to sell soft serve ice cream. This would be unallowed because they cannot bring in their own equipment, they cannot take out the existing equipment in the store, and that is not an item the corporation typically offers.