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Convenience Store Insight

Convenience Store Insight

Investment Banking Fall 2020

IN THIS ISSUE STORE INSIGHT Recent, Notable M&A Transactions Macroeconomic Indicators MERGERS & ACQUISITIONS, PUBLIC & PRIVATE CAPITAL Debt and Equity Market Conditions AND FINANCIAL ADVISORY SERVICES What We’re Reading

FOR INSTITUTIONAL USE ONLY INSIGHT Fall 2020

Deal Spotlight

7-Eleven Inc. Acquires Speedway LLC Haymaker Acquisition Corp Announces Business Combination with ARKO Holdings LTD and GPM Investments, Inc. • Announced: August 2, 2020 • Announced: July 13, 2020 • Rationale: 7-Eleven, Inc. will acquire Speedway from its parent • Transaction Detail: Special Purpose Acquisition Company (SPAC) company, Marathon Corp. Rarely do portfolios of this Business Combination size and scope come to market, and 7-Eleven made sure that they • Rationale: Haymaker has signed an LOI to enter into a business would continue to expand their industry-leading footprint. combination with leading convenience store operator, GPM Investments. • Target: Speedway is a subsidiary of Corp, Once complete, the transaction will bring a new entrant to a public c- which is a leading downstream energy company based in Findlay, store sector that has realized strong returns over the last decade. . Its convenience store subsidiary, Speedway, is the third- • Target: GPM Investments, Inc. is a leading U.S. convenience store largest convenience store in the , with ~3,900 sites operator that has grown rapidly both organically and through a series of across the country. successful acquisitions and platform integrations. GPM Investments is owned by Arko Holdings Ltd and a group of institutional investors. Raymond James served as advisor to ARKO Holdings Ltd

Tri Star Energy LLC Acquires Hollingsworth Oil Co. Inc. GPM Investments LLC (“GPMI”) Acquired Empire Petroleum Partners • Closed: July 8, 2020 (“EPP”) • Closed: October 6, 2020 • Rationale: Tri Star Energy LLC completed the acquisition of • Transaction Value: $360 million Hollingsworth Oil Co. Inc. and its 53 convenience stores operating under the Sudden Service and its 172 • Rationale: GPMI acquired EPP’s wholesale fuel distribution operations dealer accounts. and retail business totaling approximately 1,500 supplied sites and • Target: Springfield, Tennessee-based Hollingsworth controls approximately 85 company operated locations; acquisition will both Hollingsworth Oil and C&H Properties. Hollingsworth’s increase GPMI’s annual gallons distributed to over 2 billion gallons convenience network consists of 53 company-operated sites, and expand its U.S. footprint into 10 new states while also providing branded and unbranded fuel through its 172 • Target: EPP was founded in 1988 and is one of the largest fuel dealer accounts. distributors in the U.S., growing primarily through 22 acquisitions Raymond James served as advisor to Hollingsworth Oil Co. Inc. completed since 2011

RAYMOND JAMES INVESTMENT BANKING 2 CONVENIENCE STORE INSIGHT Fall 2020

Notable M&A Transactions 2020 YTD

Retail Announced Acquiror Target TEV ($MM) Store Target Description Date Count Empire Petroleum is one of the largest fuel distributors in the U.S., distributing over one billion gallons of fuel 10/6/2020(1) GPM Investments LLC Empire Petroleum Partners 85 annually to ~1,500 supplied sites, as well as approximately 85 company-operated convenience stores. Based in Winston-Salem, NC, Beroth Oil Company owns and operates 23 convenience stores under the "Four 9/22/2020 Quality Oil Beroth Oil Co. 23 Brothers" brand. They have operated throughout North Carolina for over 60 years. Tradewinds Markets operates 15 units throughout Maine, including convenience stores, car washes, and 9/2/2020 Energy North Tradewinds Markets 7 . The locations offer -branded fuel and feature a variety of eateries. Wadsworth Oil was founded in the 1920s in Tuskegee, Alabama as a wholesale fuel supplier. The company 8/13/2020 Wadsworth Oil 10 expanded into convenience retail in the 1980s and 1990s, building a 10-store portfolio. Speedway is a subsidiary of Marathon Petroleum Corp, a leading downstream energy company based in 8/3/2020 7-Eleven Inc. Speedway 21,000.0 3,900 Findlay, Ohio. Speedway is the third-largest c-store chain in the United States. Platinum Energy, based in Agoura Hills, , is a wholesale fuel distributor serving more than 200 7/30/2020 United Pacific Platinum Energy 95 locations on the West Coast.

7/29/2020 Stop-N-Go 36 Stop-N-Go, based in Madison, WI, operates 36 convenience stores in southern and northern Illinois.

Based in Springfield, Tenn, Hollingsworth controls Hollingsworth Oil and C & H Properties with a network of 53 6/25/2020 Tri Star Energy Hollingsworth Oil 53 c-stores under the Sudden Service name. Gresham Petroleum Based in Indianola, MS, Gresham Petroleum operates 48 convenience stores under the "Double Quick" brand; 2/13/2020 ReFuel LLC 48 (Double Quick) additionally operates a wholesale division which was not included in the transaction. 7-Eleven stores Of 7-Eleven of is independently owned and operated 108 retail locations throughout the greater 1/17/2020 7-Eleven Inc. 108 Oklahoma metropolitan area.

Source: Public company filings, press releases and Capital IQ. (1) 10/6/2020 represents closing date; deal was originally announced on 12/18/2019. RAYMOND JAMES INVESTMENT BANKING 3 CONVENIENCE STORE INSIGHT Fall 2020

M&A Transactions

Most Active Acquirors(1) M&A Activity By Store Count(1)

# of Stores Acquired 2015 2016 2017 2018 2019 2020 6,000 4,500 1,800 4,101 4,000 1,600 5,000 3,500 1,400

3,000 1,200 4,000 2,500 2,355 1,000 1,953 3,000 2,000 800

1,500 1,369 600 1,169 990 2,000 860 1,000 748 400 608 607 387 500 245 200 1,000 91 64 0 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20 '20 0 (3) Quarterly 3.1% 3.2% 2.9% 2.2% 4.2% 3.5% 2.2% 3.1% 2.0% 2.1% 2.1% (5.0%) (31.4%) 20.0%(2) GDP LTM Rolling Average

1) Source: Public company filings and press releases; count as of announcement date. Includes only U.S. deals. All data as of 10/9/20. RAYMOND JAMES INVESTMENT BANKING 4 2) S&P Global Ratings Q3 forecast as of 10/9/20. 3) Includes 3,9000 Speedway stores expected to close in Q1 2021. CONVENIENCE STORE INSIGHT Fall 2020

Macroeconomic Indicators

Real GDP Growth Weekly Jobless Claims (seasonally adjusted annual rates) (in millions)

10.0% 2.3% 2.2% 3.2% 3.5% 2.5% 3.5% 2.9% 1.1% 3.1% 2.0% 2.1% 2.1% 8.0 0.0% 6.0 Week Ended (10.0%) (5.0%) Weekly unemployment claims 10/3/20 Q2 2020 GDP was down 31.4%, 4.0 (20.0%) remained below one million 0.84 but S&P Global Ratings analysts 2.0 for the sixth week (30.0%) project 20% GDP Growth for Q3 (31.4%) (40.0%) 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20

Consumer Spending Growth Purchasing Managers Index (Real PCE % change, seasonally adjusted at annual rates) (annual rate) 10.0% 4.6% 4.0% 4.6% 2.4% 2.4% 2.4% 1.7% 3.5% 1.4% 1.1% 3.2% 1.8% 65.0 0.0% 60.0 September 2020 (10.0%) (6.9%) 55.4 55.0 (20.0%) Real Personal Consumption fell 34.6% in Q2 2020, marking the 50.0 (30.0%) second consecutive negative quarter Industrial production has risen 45.0 35% since its April low of 41.5 (40.0%) (34.6%) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 40.0 '17 '17 '17 '17 '18 '18 '18 '18 '19 '19 '19 '19 '20 '20 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Note: PMI Index figures above 50 indicate expansion

Source: Bureau of Economic Analysis, St. Louis Federal Reserve, Bureau of Labor Statistics, Institute for Supply Management and Capital IQ. All data as of 10/9/20. RAYMOND JAMES INVESTMENT BANKING 5 CONVENIENCE STORE INSIGHT Fall 2020

Macroeconomic Indicators (cont’d)

West Intermediate Inflation vs. 10-Year Treasury ($ per barrel)

$100 3.5%

$80 3.0% 10/5/20 $39.12 $60 2.5%

$40 2.0% Aug 2020 1.3% $20 1.5%

$0 1.0%

-$20 0.5% 10/5/20 0.78% -$40 0.0% Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20 Oct-16 Apr-17 Oct-17 Apr-18 Oct-18 Apr-19 Oct-19 Apr-20 Oct-20

Inflation (CPI) 10-Year U.S. Treasury Yield

Source: Bureau of Economic Analysis, St. Louis Federal Reserve, Bureau of Labor Statistics, Institute for Supply Management and Capital IQ. All data as of 10/9/20. RAYMOND JAMES INVESTMENT BANKING 6 CONVENIENCE STORE INSIGHT Fall 2020

C-Store Industry Fuel Margin Performance

Quarterly National Retail Margins National Retail Fuel Margins – Monthly Trends (cents per gallon)

65¢ 80¢ 60¢ 70¢ 55¢

50¢ 60¢ 45¢ 50¢ 40¢ 35¢ 40¢ 30¢ 25¢ 30¢ 20¢ 20¢ 15¢ 10¢ 10¢ Mar Jun Sep Dec Dec Jan Feb Mar Apr May June Jul Aug Sep Oct Nov

2016 2017 2018 2019 2020 5 yr. Average 2016/17 2017/18 2018/19 2019/20 4 yr. Average

Source: OPIS and Raymond James equity research. All data as of 10/9/20.

RAYMOND JAMES INVESTMENT BANKING 7 CONVENIENCE STORE INSIGHT Fall 2020

Quarterly Earnings Recap

Murphy USA Inc. (NYSE: MUSA) Casey’s General Stores, Inc. (NasdaqGS: CASY) (2)

“Same-store gallons sold were adversely impacted Quarter Ended Change Quarter Ended Change by COVID-19 and lower “With less volume loss and a guest traffic, though these 6/30/2020 6/30/2019 7/31/2020 7/31/2019 lower base margin to start eased throughout the EPS $5.73 $1.01 467.3% with, Murphy USA benefited EPS $3.24 $2.31 40.3% quarter. Fuel gross profit SSS Fuel Gallons -27.4% 3.7% -31.1% disproportionately from the SSS Fuel Gallons -14.6% -2.0% -12.6% benefited from a higher same cents per gallon increase Fuel Margin (CPG) $0.383 $0.147 $0.236 Fuel Margin (CPG) $0.382 $0.244 $0.138 fuel margin driven in part in overall margins” by the Company's SSS Merch Sales 14.4% 5.7% 8.7% SSS Merch Sales 0.0% 2.7% -2.7% centralized retail pricing In-Store Margin 11.9% 3.8% 8.1% In-Store Margin 39.6% 40.6% -1.0% strategy and procurement improvements. “

Alimentation Couche-Tard Inc. (TSX: ATD.B) (3) TravelCenters of America LLC (NasdaqGS: TA)

“The COVID-19 pandemic “Although nonfuel Quarter Ended Change continued to have a Quarter Ended Change revenues decreased 14.8% 7/19/2020 7/21/2019 meaningful impact on 6/30/2020 6/30/2019 during the second quarter, financial results. While adjusted EBITDAR margin EPS $0.71 $0.48 47.9% EPS $0.26 $0.15 73.3% benefiting merchandise sales increased….a SSS Fuel Gallons -5.2% 2.5% -7.7% SSS Fuel Gallons -21.2% 0.6% -21.8% from consolidated trips by consequence of managing Fuel Margin (CPG) $0.430 $0.269 $0.161 consumers and larger basket Fuel Margin (CPG) $0.193 $0.153 $0.040 expenses, prompt SSS Merch Sales 7.7% 2.5% 5.2% size, fuel sales declined, SSS Merch Sales -14.8% 0.3% -15.1% furloughing of employees, though compensated by and business management In-Store Margin 34.7% 34.0% 0.7% In-Store Margin 59.8% 60.6% -0.8% strong fuel margins.” improvements

Source: Public company filings, Capital IQ, Wall Street equity research. 1) Reflects total retail and wholesale fuel margin. 2) In-store margins and SSS merchandise comps calculated as weighted average of all reported in-store / non-fuel product categories. RAYMOND JAMES INVESTMENT BANKING 8 3) Reflects U.S. performance. CONVENIENCE STORE INSIGHT Fall 2020

Public Company Share Price Performance and Valuation

Convenience Store Trailing Three-Year Stock Price Performance 10-Year Convenience Store Historical Trading Multiples (EV/EBITDA)(1)

200 13.0x 180 +78.0% +69.2% 12.0x 11.7x +60.1% 160 +59.2% 11.1x 11.0x 140 +34.4% 9/30/20 10.0x 9.8x 10.0x 120 Median: 9.4x 9.1x 9.4x 100 9.0x 8.7x -12.0% 80 8.0x 60 6.6x 7.0x 7.0x 40 6.0x 20 (10/7/2017 = = 100.0)(10/7/2017 5.0x 0

4.0x Indexed Indexed Share Price Performance

Alimentation Couche-Tard Inc. TravelCenters of America Inc. Casey's General Stores, Inc. C-Store Average Murphy USA Inc. S&P 500

Source: Capital IQ. (1) Note: Price performance is based on dividend-adjusted share pricing. Indexed share price RAYMOND JAMES INVESTMENT BANKING performance (10/7/17 = 100.0). All data as of 10/9/20. 9 CONVENIENCE STORE INSIGHT Fall 2020

Public Company Trading Statistics: Convenience Stores

Current Price as a % of LTM High LTM P/E Ratio

98.0% 25.0x 22.8x 100% 96.1% 90.6% Median 96.1% 20.0x 80% 15.0x Median 15.0x 15.0x 60% 10.3x 10.0x

40% 5.0x

20% 0.0x ATD.B CASY MUSA ATD.B CASY MUSA

EV / LTM EBITDA EV / 2021E EBITDA

15.0x 15.0x 13.0x 13.0x 11.2x 10.6x 11.1x 11.0x 11.0x Median 9.4x Median 9.0x 10.6x 9.0x 9.4x 9.0x 7.0x 6.1x 7.0x 5.0x 5.0x 3.0x 3.0x ATD.B CASY MUSA ATD.B CASY MUSA

Source: Public company filings, Capital IQ, Wall Street equity research. Note: Share prices current as of 10/6/20. (ATD.B = Alimentation Couche-Tard Inc., CASY = Casey’s General Stores, Inc., MUSA = Murphy USA Inc.) RAYMOND JAMES INVESTMENT BANKING 10 CONVENIENCE STORE INSIGHT Fall 2020

Public Company Trading Statistics: Wholesale Fuel MLP

Wholesale Fuel MLP Dividend Adjusted Prior Three Year Unit Price Performance Annualized (MRQ) Distribution Yield (SUN, CAPL, GLP)

13.8% 15% 13.2% 13.5% Median 160 12% 13.5% 9% 140 6% 120 3% +11.0% +8.1% 0% 100 SUN GLP CAPL

80 -21.7% EV / LTM EBITDA

60 14.0x

12.0x

(10/7/2017 = = 100.0)(10/7/2017 40 -61.0% 9.7x 10.0x 9.3x Median

Indexed Indexed Share Price Performance 20 9.3x 8.0x

6.0x 5.1x

Alerian MLP Index LP 4.0x LP CrossAmerica Partners LP SUN GLP CAPL

Source: Public company filings, Capital IQ, Wall Street equity research. Note: Share prices current as of 10/7/20. Price performance is based on dividend-adjusted share pricing. Indexed share price performance (10/7/17 = 100.0). (SUN = Sunoco LP, CAPL = CrossAmerica Partners LP, GLP = Global Partners LP RAYMOND JAMES INVESTMENT BANKING 11 CONVENIENCE STORE INSIGHT Fall 2020

Debt Market Outlook

Leveraged Finance Volume ($BN)

$150B 119.7 $125B 100.5 93.1 $100B 76.9 67.2 74.6 $75B 62.2 58.7 62.8 44.2 43.4 $50B 19.5 $25B 2.0 $0B Oct 2019 Nov 2019 Dec 2019 Jan 2020 Feb 2020 Mar 2020 Apr 2020 May 2020 Jun 2020 Jul 2020 Aug 2020 Sep 2020 MTD Oct(1) Loans Bonds 2020 S&P LCD LEVERAGE LOAN 100 INDEX YTM Non-Investment Grade Bond Yields 15% 12% 10% 10% 8% 10/2/20 5.73% 6% 5% 4% 2% 0% 0%

Yield To Maturity BAML High Yield Index Source: LCD Research. (1) As of 10/02/2020. RAYMOND JAMES INVESTMENT BANKING 12 CONVENIENCE STORE INSIGHT Fall 2020

Debt Market Outlook (Cont’d)

Middle Market Leverage Trends(1)

Average Leverage Ratio Average LBO Equity Contribution

6.0x 5.6x 55% 5.4x 5.5x 5.3x 5.1x 5.0x 4.9x 4.9x 5.0x 4.8x 50% 4.5x 4.0x 45% 3.5x 3.0x 40% 2.5x 2.0x 35% 2013 2014 2015 2016 2017 2018 2019 LTM 2Q20 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: LCD Research. (1) Middle market defined as companies with less than $50 million in EBITDA. All data as of 10/2/20. RAYMOND JAMES INVESTMENT BANKING 13 “'s Seven & i seals $21 billion deal for Marathon “COVID-19 Pandemic Has Created a New Gas-Buying Petroleum's Speedway gas stations” | Landscape” | CS News August 2, 2020 - The Japanese owner of 7-Eleven convenience stores September 30, 2020 - With millions of Americans working and studying has agreed to buy Marathon Petroleum Corp’s (MPC.N) Speedway gas from home, cancelling international travel and generally upending What we’re stations for $21 billion, brushing aside coronavirus concerns to return their routines due to COVID-19, a new gas-buying landscape has to the table five months after initially baulking at the deal. The emerged, according to a new report from GasBuddy. acquisition is one of the biggest this year, suggesting the pandemic, reading while forcing many companies to focus on protecting balance sheets “Read More” instead of expansion, has not killed off global dealmaking altogether. The move will help Seven & i Holdings Co Ltd (3382.T) shift focus beyond Japan, where its stores and supermarkets face a shrinking “GPM, Arko Holdings Set to Combine With Haymaker” | population, slow economic growth and tough price competition. Isabelle Gustafson, CStoreDecisions July 14, 2020 – Haymaker Acquisition Corp., a publicly traded special “Read More” purpose acquisition company, ARKO Holdings Ltd. (Arko), an Israeli public holding company and GPM Investments LLC (GPM), announced “Two-Thirds of C-stores Hampered by Legacy Infrastructure that they have entered into a letter of intent for a business During COVID-19 Pandemic” | CS News combination — a transaction at approximately $1.5 billion in enterprise value. The business combination would result in 100% of July 13, 2020 – The recent COVID-19 pandemic shifted how the convenience both GPM and Arko combining with Haymaker with substantial channel does business and put retailers' technology capabilities into focus. In rollover from existing equity holders. Currently, Arko owns 68% of a recent survey by Censuswide on behalf of Zynstra, an NCR company, found GPM, and the remaining 32% is held by Davidson Kempner Capital that inflexible infrastructure delayed convenience store retailer from adapting Management LP, funds managed by Ares Management , their store operations. Specifically, 63 percent of respondents said legacy and Harvest Partners SCF LP. “I am very excited about this infrastructure held them back from making changes. In addition, 81 percent combination,” said Arie Kotler, CEO of Arko and GPM. “We have a of c-store retailers said COVID-19 elevated the role IT plays in the eyes of C- demonstrated history of profitable growth and a track record of level decision makers, with 100 percent of c-store retailers with 500-plus executing consolidation opportunities. Combining with Haymaker as a stores identifying this as a new reality. Sixty-four of the survey respondents Nasdaq-listed, pure-play operator of convenience stores greatly also identified the need to adapt their technology to keep up with newly enhances our ability to execute our growth strategy in a large, formed consumer behaviors. growing, recession resistant industry.”

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bankers research Oklahoma analysts Has been acquired by Has been acquired by +4 & Terminal Travel Center Operators dedicated equity Operators July 2020 March 2020 capital market pros Robust transaction Has sold its convenience Oil Jobbers / Merchandise/ Has been acquired by store and fuel distribution experience(1) Wholesale Fuel Foodservice assets to Distributors Distributors +70 $10B $289,000,000 November 2018 October 2018 relevant total deal industry value Commercial Mobile This material is not to be considered an offer or solicitation regarding the sale of any Fuel & Lube transactions Distributors Refueling security. This material was prepared within Raymond James & Associates’ Has acquired Investment Banking Department and is for information purposes only. This material Has acquired is not a product of Raymond James & Associates’ Research Department; recipients of +20 this report should not interpret the information herein as sufficient grounds for an years focused on Alternative Fuel Carwash $535,000,000 investment decision or any other decision. The report shall not constitute an offer to Providers Operators sell or the solicitation of an offer to buy any of the securities mentioned herein; past the industry April 2018 November 2016 performance does not guarantee future results. Information contained in this report was received from sources believed to be reliable, but accuracy is not guaranteed. (1) As of 10/9/20. RAYMOND JAMES INVESTMENT BANKING 15 Raymond James & Associates, Inc., member of Stock Exchange / SIPC

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