Acquisition Fuels Up Gas Station Operator United

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Acquisition Fuels Up Gas Station Operator United
Pumped: Carson gas station run by United Pacific

Gardena gasoline distributor United Oil opened for business in 1955, operating a handful of filling stations in Southern California – the region where the company still sells most of its gasoline.

But now, 60 years later, it’s stepping outside of its home turf, and in a big way: United Oil last week announced an acquisition that will nearly triple the number of stations the company operates and expand its presence into four new states.

United Oil, backed by its private equity owner Fortress Investment Group, acquired hundreds of gas stations and convenience stores from Pacific Convenience & Fuels of Pleasanton in a deal that will change its name to United Pacific.

The company now controls nearly 400 gas stations in California, Nevada, Colorado, Oregon and Washington state.

Through a leveraged buyout, United Pacific will take over 251 filling stations and convenience stores as well as 1,750 employees from Pacific Convenience. Before this deal, United Oil operated 128 gas stations and stores in California, mostly in Southern California. The company raked in about $3.1 billion in 2013 revenue.

Financial terms of the deal were not disclosed, but in a smaller related transaction, Getty Realty Corp. of New York purchased 77 stores from Pacific Convenience for $215 million and simultaneously leased the stations back to United Pacific.

The deal is a big one for United Pacific, but not unexpected. The company was acquired last year by Fortress, a New York private equity firm. Soon after that deal closed, its new chief executive, Joe Juliano, told gas station trade publications that he intended to start buying other station operators.

It’s common for private equity firms to acquire one company then use it as a platform with which to acquire others, ultimately creating a larger company that can be sold off or taken public.

Kelly Kriebs, a partner in the downtown L.A. office of law firm Sidley Austin who represented United Oil in the deal, said it was clear Fortress had just that kind of plan in mind when it bought United last year.

“I think the deal made it well known this was not a one-time thing, that the idea behind buying United Oil was to grow that business and make it known they are interested in growth and acquisition opportunities,” Kriebs said.

One on one

United Oil’s aspiration to expand through acquisition began to take shape in October, when talks about a deal with Pacific Convenience started through a third party who has a “long-standing relationship” with both companies, a United Pacific spokesman said, declining to name that party. As a result, there was no bidding process, opening the door for a one-on-one negotiation.

Discussions began in earnest around the end of the year. During negotiations, Kriebs said leaders from the two companies found similarities that made the transaction easier.

“They spoke the same language in many aspects,” Kriebs said. “One of the reasons why this deal worked so well is because the companies both had strong relationships with the fuel suppliers and the suppliers were familiar with both companies.”

Before selling stations to United Oil, Pacific Convenience reported on its website that it owned more than 570 gas stations and convenience stores across six Western states.

In an email to the Business Journal, United’s Juliano said he was interested in Pacific Convenience’s stations because of their wider reach and good locations, among other factors.

“Our plan has always been to leverage the platform to grow and expand our retail presence in the West,” he wrote. “The PC&F acquisition fit very well within our strategic plan as there were a large number of high quality sites, similar fuel brands, strong convenience store locations and a scalable IT platform.”

And with this deal in the bag, more are likely to follow. Carl Larry, director of oil and gas business development at San Antonio consulting firm Frost & Sullivan, said other station operators will likely see this transaction and think they might want to give United a call.

“A lot more oil retailers will look at this and say this isn’t a bad deal,” he said.

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