In a busy period for M&A, downstream retailers may soon find out how hot the
market is for acquiring a "New Era" station chain. OPIS has learned that
Thorntons has retained investment bank Lazard to explore the sale of the high
volume and well-regarded 192-store convenience chain.
Louisville, Ky.-based Thorntons has been a mainstay of many Midwestern markets,
but is best known as a dominant retailer in its home state. It also owns and
operates stores in Indiana, Illinois, Ohio and Tennessee and built stations in
the Florida market about four years ago.
Among companies ranked by OPIS in terms of market efficiency (percentage of
market share divided by percentage of total outlets in a given area), Thorntons
ranks 19th in the country, typically boasting two or more times the share of
average competitors. Stores typically have high-end inside offerings and are
viewed as exceedingly well-managed by peers, with an ability to purchase at
highly competitive unbranded prices.
The sale effort is a surprise to those who note that the still-expanding
company was looking for 100 new employees for full- and part-time positions as
recently as late March.
A spokesperson for the chain said that it doesn't "comment on rumor or
speculation," adding that "we see great growth ahead for Thorntons this year
and in future years and we are very happy with our business."
OPIS has confirmed with multiple sources, however, that Lazard is showing a
"book" on the company. The choice of that investment bank is an odd one, given
recent retailer preferences for M&A specialists such as Matrix, Raymond James
and Wells Fargo. However, the investment house does boast a particular skill
in handling ESOPs -- companies that have employee stock ownership programs --
and Thorntons rewards employees with ownership shares after one full year of
service.
According to OPIS' Retail Year in Review, Thorntons boasted market shares of
7.16% in Kentucky, 3.9% in Illinois, 2.34% in Indiana, 1.67% in Tennessee and
0.93% in Ohio; and 0.31% in Florida. When its gasoline offering is judged
against average unbranded costs, it has year-to-date average margins for
regular of 12.8cts/gal, compared with 10.7cts/gal in 2017. Observers believe
that the company has long been able to procure product at very competitive
numbers, so those gross margins are probably understated. Thorntons street
prices average 3.63cts gal below competitors, so the company prices gasoline
aggressively in all areas.
The motive for selling is not known, although high multiples paid for retail
chains and the threat of eventual demand destruction may have played into the
decision. The company has been run by the Thornton family since it was founded
in 1971.
M&A experts polled by OPIS believe that there will be strong interest from
consolidators as well as from companies that might view the Thorntons
properties as a means of expanding in some key geography. Marathon might be the
most logical suitor, but would likely run into Federal Trade Commission issues
where its Speedway or Marathon brands overlap with the private brand. Marathon
also has its hands full in what will be a multiquarter digestion of Andeavor
refining, marketing and logistics assets.
7-Eleven is mentioned as a bidder, as is MAPCO, which is owned by a Chilean oil
company that has clearly expressed interest in expanding. Casey's could even be
a buyer, given the challenge it has in gaining the scale necessary to avoid
being a takeover candidate.
--Tom Kloza, tkloza@opisnet.com
Copyright, Oil Price Information Service
