Business Context and Reporting Period
This Form 8-K Current Report, dated December 17, 2018, discloses a material definitive agreement entered into by CrossAmerica Partners LP (the Partnership). The filing details a strategic asset exchange with Circle K Stores Inc., which indirectly owns 100% of the Partnership's general partner. The transaction was unanimously approved by the independent Conflicts Committee of the General Partner's board of directors.
Key Financial Metrics and Transaction Value
The filing centers on an asset swap valued at approximately $184.5 million on both sides of the transaction. Specific financial metrics such as revenue, profit, cash flow, or debt levels are not reported in this document as it is a transactional filing rather than a periodic financial report.
- Assets Transferred by CrossAmerica: 73 convenience and fuel retail stores (56 master lease properties and 17 owned properties in the U.S. Upper Midwest).
- Assets Acquired by CrossAmerica: 192 company-operated convenience and fuel retail stores (162 fee and 30 leased) from Circle K.
- Transaction Structure: The exchange will occur in tranches over a period of up to 24 months, contingent on Circle K executing dealer or agent agreements for the acquired properties.
- Indemnification Limits: Losses are subject to a $1.845 million deductible and a $39.9 million aggregate cap.
Material Changes and Operational Impact
The primary material change is the significant expansion of CrossAmerica's store count and geographic footprint. The Partnership is exchanging 73 properties for 192 properties, effectively more than doubling the number of stores involved in this specific transaction. The existing fuel supply arrangements for the 56 master lease properties being transferred will remain unchanged. The transaction involves the transfer of fee simple titles, buildings, tangible personal property (including underground storage tanks), contracts, inventory, and goodwill.
Outlook, Risks, and Contingencies
Outlook and Timing: The asset exchange is expected to close in a series of transactions over 24 months. Any net valuation difference after the final closing will be settled in cash between the parties.
Risks and Contingencies:
- Closing Conditions: Each tranche closing is subject to customary conditions and the execution of dealer/agent agreements by Circle K.
- Environmental Liability: An Environmental Responsibility Agreement (ERA) was executed. Generally, each party retains liability for known contamination at sites transferred and assumes liability for unknown contamination at sites received.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from projections regarding the benefits and timing of the transaction.
Investor Verification Checklist
- Verify the specific locations and financial performance of the 192 Circle K properties to be acquired versus the 73 CrossAmerica properties being divested.
- Review the attached Asset Exchange Agreement (Exhibit 2.1) for detailed representations, warranties, and specific closing conditions.
- Monitor the progress of dealer/agent agreements required to trigger the tranche closings over the 24-month period.
- Assess the environmental liabilities assumed under the Environmental Responsibility Agreement for the incoming properties.
- Confirm the impact of the transaction on the Partnership's leverage ratios and liquidity once the final closing occurs.