Business Context and Reporting Period
ARKO Corp. filed this Form 8-K on September 12, 2022, reporting an asset purchase agreement entered into on September 9, 2022. ARKO subsidiary GPM Investments, LLC agreed to acquire substantially all assets and certain liabilities of Transit Energy Group, LLC and affiliates.
Transaction and Key Financial Terms
- The acquired business includes approximately 150 retail gas stations and stores, approximately 200 dealer sites, a commercial, government and industrial business, certain bulk plants, and transportation equipment.
- At closing, the buyer will pay $325.0 million in cash, plus the value of inventory and specified deposits, assets and other closing adjustments.
- Buyer will make two additional $25.0 million payments on the first and second anniversaries of closing. Subject to specified conditions, ARKO may elect to pay either installment in cash or ARKO common stock.
- ARKO expects to fund approximately $60.0 million of the closing cash consideration, inventory and other adjustments from its own sources. The balance is expected to come from Oak Street Real Estate Capital Net Lease Property Fund, LP or affiliates.
- Oak Street or affiliates have agreed to acquire fee-simple ownership of 106 acquired sites, which GPM or affiliates will lease from Oak Street.
- The filing does not provide pro forma revenue, profit, cash flow, margin, debt, liquidity, or earnings-accretion figures for the acquired business or ARKO.
Material Changes Versus the Prior Comparable Period
The filing does not present comparative financial statements or period-over-period operating results. The material development is the proposed acquisition and related real-estate financing and leasing arrangement.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Closing remains subject to customary conditions, including the absence of legal restraints, expiration or termination of the applicable Hart-Scott-Rodino antitrust waiting period, accuracy of representations and warranties, and performance of contractual covenants.
- The transaction is not subject to a financing condition.
- The Purchase Agreement contains customary termination rights for both buyer and seller.
- Installment payments made in shares would be based on the daily volume-weighted average closing price of ARKO common stock over the ten trading days preceding the applicable anniversary. Potential share issuance would dilute existing shareholders.
- The potential installment shares were not registered under the Securities Act and were offered in reliance on Section 4(a)(2) and Rule 506 of Regulation D, with Transit representing that it is an accredited investor.
- At closing, ARKO and Transit are expected to enter into a registration rights agreement for any installment shares issued.
- The company cautioned that the agreement’s representations, warranties and covenants were made for contractual risk allocation and should not be relied upon as statements of current factual conditions.
Important Facts for Investors to Verify
- Whether and when the transaction closes, including satisfaction of antitrust and other closing conditions.
- The final purchase price, including inventory, deposits and other closing adjustments.
- The amount funded by ARKO versus Oak Street and the terms of the related site acquisitions and leases.
- Whether the $25.0 million anniversary payments are made in cash or common stock, and the resulting dilution if shares are issued.
- The acquired business’s historical and pro forma revenue, profitability, cash flow, margins, capital requirements and liabilities, which are not provided in this filing.
- Any subsequent disclosure regarding integration costs, synergies, financing, lease obligations, or changes to the transaction terms.