• Yesway Raises War Chest for Improvements, More Deals

  • Yesway Raises War Chest for Improvements, More Deals

    Fast-growing c-store roll-up Yesway just secured an additional $235 million of
    equity that could precede more acquisitions, but also fund some aggressive
    raze-and-rebuids across its portfolio.

    Yesway is owned by private equity firm Brookwood Financial Partners, and that
    company raised the money via a private placement. In total, Brookwood has
    raised over $642 million for the Yesway affiliate and has also presided
    over$237 million in sale-leaseback proceeds.

    Last year, Yesway tripled its size with the purchase of Southwestern chain
    Allsup's and has devoted much of its time to integrating the 300 stores in that
    portfolio. Company-operated stores now include sites in Iowa, Kansas, Missouri,
    Nebraska, New Mexico, Oklahoma, SouthDakota, Texas and Wyoming.

    "Since founding Yesway approximately five years ago and acquiring the Allsup's
    convenience store chain last November, we have been extremely pleased with our
    integration efforts and how well the company has performed," noted Tom Trkla,
    Yesway's CEO. "As part of our integration of Allsup's, we have identified
    over$135 million in real estate capital projects within the portfolio,
    including razing and rebuilding 27 existing Allsup's stores, performing
    targeted upgrades to over 100 additional Allsup's stores, converting several
    existing Yesway stores in Texas to the Allsup's brand, significantly upgrading
    many of our existing Yesway branded stores and adding new to market stores in
    communities which we have determined could benefit from an Allsup's store."

    Under the direction of Allsup family members, the chain has already completed
    over 100 raze and rebuilds and has increased store size from an average 2,400
    square feet to over 4,800 square feet. In addition to more merchandise, many
    stores have increased the number of diesel and gasoline fueling stations.

    Yesway's parent company, BW Gas & Convenience Retail, is headquartered in Fort
    Worth, Texas, and now boasts 402 stores. Plans are to grow the portfolio to
    over 500 c-stores in selected regions of the U.S. over the next several years.

    Last year, CEO Tom Trkla told OPIS that "Wall Street would love to see some
    more public c-store retailers," and OPIS data suggests that 2020 will be a
    record year for average fuel profits in most sections of the country. While the
    oil business has suffered from the wellhead to the refinery, the downstream
    retail portion has done quite well, despite the loss of volumes related to
    COVID-19.

    In addition to Yesway's plans for an eventual IPO, the GPM chain (which now
    includes Empire Petroleum) will trade publicly later this year. A special
    purpose acquisition company led by former Speedway head Tony Kenny is also
    looking to roll up fragmented stores, and there are several other private
    equity chains that have quietly put together networks of 40-200 stores with
    dedicated capital to bigger and more levered deals.

    The fast-growing EG Group is also believed to be eyeing an eventual public
    debut with a broad basket of international assets.

    The Allure of the Rural and Suburban

    Yesway's target companies to date have tended to come in markets that are rural
    or bordering on the suburban. Trkla told OPIS last year that was a purposeful
    strategy. Demand destruction during the COVID-19 pandemic has been much more
    dire in urban and suburban communities, and c-stores in areas that appeal to
    commuters have been among the hardest hit.

    Yesway's reliance on a more rural geography suggests that fewer competitors
    will come and there should be few instances where Yesway shares an intersection
    with two or three competitors.

    Wall Street analysts suggest that chains need to achieve the scale of about 500
    or more stores with annual EBITDA in the $150 million range before launching an
    IPO.

    --Tom Kloza, tkloza@opisnet.com; Editing by Michael Kelly,
    michael.kelly3@ihsmarkit.com



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