Haymaker Acquisition Corp II, a special purpose acquisition company, agreed to a business combination with GPM Investments, a national convenience store chain and ARKO Holdings, an Israeli holding company whose primary asset is a controlling stake in GPM Investments. The combined company will have an equity market capitalization of about $1.4 billion. The combined company will be led by GPM’s current management team, including Arko’s and GPM’s Chief Executive Officer, Arie Kotler.
Haymaker Acquisition Corp. II (NASDAQ: HYAC) (“Haymaker”), a publicly traded special purpose acquisition company, ARKO Holdings Ltd. (“Arko”), an Israeli public holding company (TASE: ARKO) whose primary asset is a controlling stake in GPM, and GPM Investments, LLC (“GPM” or the “Company”), announced today that they, and certain other related parties, have entered into definitive agreements for a business combination, pending shareholder approval. The transaction is expected to close in the fourth quarter of 2020 and upon closing, the combined company is expected to be listed on the Nasdaq Stock Market under the ticker symbol ARKO.
GPM, the seventh largest convenience store chain in the United States, has grown its store count from 320 stores in 2011 to 1,393 locations as of June 30, 2020 in 23 states comprised of 1,266 company-operated stores and 127 additional sites to which it supplies fuel. The Company operates in three segments: retail, which consists of fuel and merchandise sales to retail consumers; wholesale, which supplies fuel to third-party dealers and consignment agents; and GPM Petroleum, which supplies fuel to Company stores as well as subwholesalers and bulk purchasers.
Given substantial rollover from existing equityholders, upon completion of the transaction, pro-forma leverage, defined as Net Debt to 2020E Pro Forma Adjusted EBITDA, is expected to be approximately 1.7x. It is anticipated that the combined company will have an equity market capitalization at closing of approximately $1.4 billion. Anticipated total enterprise value, pro-forma for the pending acquisition of Empire Petroleum which GPM anticipates closing in the beginning of the fourth quarter of 2020, is expected to be approximately $2.0 billion, or ~9x GPM’s 2021E Pro Forma Adjusted EBITDA.
Arie Kotler, Chief Executive Officer of Arko and GPM, commented: “We are excited to reach a larger global audience through the pending business combination with Haymaker and subsequent listing on the Nasdaq Stock Market. We have an established platform for identifying and integrating successful acquisitions in the growing, fragmented and historically recession resilient convenience store industry as well as attractive organic sales and profitability drivers. This transaction provides us with increased liquidity and access to the broader capital markets, enabling us to continue to execute on our proven growth strategy as we expand our network of convenience stores across the United States.”
Steven Heyer, CEO and Executive Chairman of Haymaker, commented: “Arko and GPM are the ideal partners for Haymaker. Their business has all of the key attributes we were seeking and we are very pleased to announce the definitive agreement for this combination. We believe Arko and GPM, with their established platform for growth, talented and driven management team, and demonstrated success operating in an attractive end market, will drive value for all stakeholders. Given the current environment, the Company’s resilient business model is particularly relevant, the inherent growth drivers extremely compelling, and their disciplined execution commendable. We are excited to continue to work with Arie and his team as we broaden the shareholder base globally at the newly combined Company and build on their successful track record of growth.”
* Adjusted EBITDA is calculated as EBITDA further adjusted by excluding the gain or loss on disposal of assets, impairment charges, acquisition costs, other non-cash items, and other unusual or non-recurring charges. Pro forma Adjusted EBITDA gives effect to acquisitions and synergies for the entire period presented irrespective of the actual timing of acquisitions or commencement of synergies during the period.
Highlights of the proposed transaction:
The Company has grown through acquisitions to become the 7th largest convenience store chain in the United States, with 1,266 company-operated locations (excluding pending acquisitions) and 127 dealer sites to which it supplies fuel, in 23 states. The Company has increased its store count approximately 4.4x over the past seven years.
The Company projects its Adjusted EBITDA will have grown at a 28%-29% compound annual growth rate (“CAGR”) from 2016 through 2020E.
The convenience store industry has demonstrated long-term growth and remains highly fragmented. The industry has grown at a 3.4% CAGR since 2007**. The top ten companies control less than 20% of the store base in the United States, providing significant opportunities for future growth.
The Company’s growth has accelerated in more recent months during the COVID-19 pandemic as consumers shift shopping patterns to convenience stores from other channels.
The combined company will be led by GPM’s current management team, which has significant industry and public market experience, including Arko’s and GPM’s Chief Executive Officer, Arie Kotler. Arko and GPM will also benefit from Haymaker’s investing and operational experience at Fortune 500 companies, particularly in the consumer and hospitality sectors.
** NACS State of the Industry Report
Raymond James & Associates, Inc. is serving as lead financial and capital markets advisor. Nomura Securities International, Inc., Stifel, Nicolaus & Company, Incorporated, BMO Capital Markets Corp., and Citigroup Global Markets Inc. are serving as financial advisors and capital markets advisors to Haymaker. Cantor Fitzgerald & Co. is serving as capital markets advisor to Haymaker and Morgan Stanley & Co. LLC is serving as financial and capital markets advisor to Arko. DLA Piper LLP (US), Gornitzky & Co., and Ellenoff Grossman & Schole LLP are serving as legal advisors to Haymaker. Greenberg Traurig, LLP and S. Friedman & Co. are acting as legal advisors to Arko.
Investor Conference Call Information:
Arko, GPM, and Haymaker will host a joint investor conference call to discuss the proposed transaction Wednesday, September 9, 2020 at 9:00 AM ET. Interested parties may listen to the prepared remarks via telephone by dialing 1 (877) 407-3982 in the United States, 1 (809) 406 247 in Israel, or 1 (201) 493-6780 in other countries. Please reference Conference ID 13708312 when prompted.
The conference call webcast, a related investor presentation with more detailed information regarding the proposed transaction and a transcript of the investor call will be available at www.haymakeracquisition.com. The investor presentation will also be furnished today to the Securities and Exchange Commission (the “SEC”), which can be viewed at the SEC’s website at www.sec.gov.
Additional Information Posted to Website
Haymaker posted information regarding the proposed transaction, which is available at www.haymakeracquisition.com. The investor presentation will also be furnished today by Haymaker to the SEC on a current report on Form 8-K, which can be viewed at the SEC’s website at www.sec.gov.
About GPM and Arko:
Based in Richmond, VA, GPM was founded in 2003 with 169 stores and has grown through acquisitions to become the 7th largest convenience store chain in the United States, with 1,393 locations comprised of 1,266 company-operated stores and 127 dealer sites to which it supplies fuel, in 23 states. GPM operates in three segments: retail, which consists of fuel and merchandise sales to retail consumers; wholesale, which supplies fuel to third-party dealers and consignment agents; and GPM Petroleum, which supplies fuel to GPM stores as well as a small number of independent operators and bulk purchasers.
Arko is the controlling shareholder of GPM (owns ~68%) and, as part of the proposed transaction, the shares of Arko will be de-listed from Tel-Aviv stock exchange. At the closing of the proposed transaction with Haymaker, Arko will have no material independent operating activities, income, or net assets, other than its ownership interest in GPM.
Haymaker is a $400 million blank check company formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. The Company’s acquisition and value creation strategy is to identify, acquire and, after its initial business combination, build a company in the consumer, retail, media, or hospitality industries. The Company is led by Chief Executive Officer and Executive Chairman Steven J. Heyer, President Andrew R. Heyer, Chief Financial Officer Christopher Bradley, and Senior Vice President Joseph Tonnos. For more information about Haymaker, please visit www.haymakeracquisition.com.