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Beverage corporation and convenience-store retailer Fomento Economico Mexicano S.A.B. of C.V. (FEMSA) has completed the acquisition, announced Aug. 1, of Delek US Holdings Inc.’s retail operations, which include 249 c-stores located primarily in Texas, for approximately $385 million. This acquisition represents an important milestone for FEMSA, which is expanding its commercial presence into the U.S. market through this transaction.
Operating under the DK brand, approximately 90% of Delek US’s convenience stores are in the state of Texas, with the remaining sites located mostly in New Mexico and with a small presence in Arkansas. Almost all stores have a gas station under the DK and Alon fuel banners; the transaction also includes a small fuel transportation fleet.
Monterrey, Mexico-based FEMSA owns the world’s largest Coke bottler, Coca-Cola Mexico. It participates in the retail industry through a Proximity Americas Division, operating the OXXO convenience-store chain and other related retail formats, and Proximity Europe which includes Valora, its European retail unit which operates convenience and “foodvenience” formats. OXXO has more than 22,800 stores in five countries, including Mexico, Colombia, Chile, Peru and Brazil.
“Always focused on the customer, FEMSA has developed solid capabilities such as store operations, segmentation, purchasing and supply chain management, which will be essential in the integration of Delek stores,” FFEMSA said in a statement sent to the Mexican stock exchange, Bolsa Mexicana de Valores (BMV) upon the deal’s completion.
Through OXXO, FEMSA has acquired the experience and expertise in developing core retail capabilities that will be invaluable as the company launches and pursues its U.S. convenience strategy, it said when the deal was announced. While the strategy is ultimately broader than any single region or target demographic, it said, the appeal of the OXXO brand may be relevant in certain markets served by the DK stores.
The company has not revealed any rebranding plans for Delek US’s c-stores, but “every press release has said ‘OXXO is coming to America,” Peter Rasmussen, founder and CEO of St. Petersburg, Florida-based Convenience and Energy Advisors, a global strategic consulting firm, told CSP, inferring that the stores will eventually sport the new brand.
Moving into the U.S. Southwest is a good move for FEMSA, he said. “You attach onto your geography and then you have a large group of people that know the brand already. That’s powerful,” he said.
FEMSA “is going to be one of the strongest competitors that we’ve seen in the U.S. market. It’s going to force all retailers to continue to elevate because it’s going to be a very, very good competitor,” Rasmussen said. “It’s really a superpower in loyalty, and its loyalty results just continue to grow quarter to quarter.”
He added that FEMSA also offers Spin by Oxxo, a popular financial service for the underbanked that provides cross-border, person-to-person mobile payments, transactions, deposits, cash withdrawals and Visa card services and makes payment easier in store.
U.S. ‘Proof of Concept’
For FEMSA, the fragmented U.S. market offers a strategic fit and presents an opportunity to build a platform that, over time, has the potential to achieve scale and create shareholder value, the company said in closing this deal. The Delek stores have the right set of attributes to be FEMSA’s first step in U.S, expansion in terms of size, geographical footprint and possibilities for extensive experimentation, testing and fine-tuning of the company’s convenience value proposition, it said.
The company has long held aspirations to expand OXXO into the United States. The chain opened its first “proof-of-concept” U.S. c-store in Eagle Pass, Texas, in 2014. It opened its second location in Laredo, Texas, in 2015. In 2015, it said it planned to invest more than $850 million and open as many as 900 U.S. c-stores over the next 10 years; however, a Texas law prohibits retailers from being owned by firms with wholesale ties to the liquor industry. At the time, FEMSA’s had a 20% stake in Dutch brewer Heineken. Neither of the U.S. stores sold alcohol.
FEMSA sold its stake in Heineken in 2023.
It was “one of those deals I knew that eventually would happen someday,” said Rasmussen. “I knew they’d make it into the to the United States at some point.”
As for further U.S. expansion, since FEMSA is “deep” into Central America, South America and Europe, “I don’t think it would be much for them to jump across the country once they get their foot in with their first acquisition,” he said.
Retail Value
The sale of Delek US’s retail network “is an incremental step in our commitment to unlock the sum-of-the-parts value inherent in our system,” Avigal Soreq, president and CEO of Delek US Holdings, said in early August.
“The completion of the sale of Delek US Retail to FEMSA is an important step in our value creation journey,” Soreq said upon the deal’s completion. “We are pleased with this transaction and look forward to building upon our relationship with FEMSA in the future. I am thankful to Delek US Retail and its employees and wish them success as they become an important part of FEMSA’s growth strategy in the United States.”
Delek US Holdings is No. 31 on CSP’s 2024 Top 202 ranking of U.S. convenience-store chains by store count.
Brentwood, Tennessee-based Delek US Holdings is a diversified downstream energy company with assets in petroleum refining, logistics, pipelines and renewable fuels. The refining assets consist primarily of refineries operated in Tyler and Big Spring, Texas, El Dorado, Arkansas and Krotz Springs, Louisiana, with a combined crude throughput capacity of 302,000 barrels per day. The logistics operations include Delek Logistics Partners LP, a growth-oriented master limited partnership (MLP) focused on owning and operating midstream energy infrastructure assets. Delek US Holdings and its subsidiaries owned approximately 72.5% (including the general partner interest) of Delek Logistics Partners.
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Greg Lindenberg has been covering convenience-store news and writing about the c-store and gas station industries for more than a quarter of a century. He specializes in mergers-and-acquisitions (M&A) news.
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Publish date : 2024-10-02 00:15:00
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