Forecourt retailer Applegreen said on Wednesday it has agreed to acquire a 40 per cent holding in 23 highway services plazas in Connecticut, investing $37.6 million (€33.5 million) to expand its US footprint.
The company said it had entered into a consortium shareholder agreement with IST3 Investment Foundation to buy JLIF Holdings (Project Service) US and its subsidiary Project Services, which operates the Connecticut Service Plazas , for an enterprise value of $229 million (€203 million).
The plazas are located on three main interstate routes between New York City and Boston, Massachusetts.
"The deal moves us up the food chain and takes us from focusing on the smaller traditional petrol filling station end of the business in the US into the motor service area," group chief executive Bob Etchingham told The Irish Times. "These plazas are one of the busiest routes in the US."
The deal supports Applegreen's rapid growth in North America and its strategy to reduce its dependency on fuel by adding significant food and beverage operations.
Applegreen had grown its US business from scratch in 2014 to 121 sites along the east coast at the end of last year, before entering a deal in June to add 46 locations in upper mid-west states of Michigan, Minnesota and Wisconsin. The company has 199 sites in the Republic of Ireland and 160 in the UK.
Debt facilities
As part of the latest deal, Applegreen has an option agreement that can be exercised five years after the completion of the deal that will allow Applegreen to increase its interest in CT Service Plazas to 60 per cent.
The acquisition will be funded from existing group debt facilities and is expected to be completed by the third quarter, subject to approval from Connecticut department of transportation.
Group chief financial officer Niall Dolan said Applegreen had been working on the deal for the past six months. The sellers were UK funds Equitix and Dalmore, who had acquired the highway service plazas as part of their purchase of John Laing Infrastructure Fund last year.
Mr Etchingham said that Applegreen plans to add to its service plazas business in the US in time, though he added that he didn’t expect “anything to materialise in the short term”.
About 91 per cent of revenue generated in the plazas is from long-term anchor tenants including McDonald’s, Dunkin’ Donuts, Subway and Alliance Energy.
“The deal is another significant strategic step for the company, growing its exposure to non-fuel food and beverage earnings and, importantly, giving the group access to the highly regulated-with high barriers to entry-US motorway service areas for the first time,” said Goodbody Stockbrokers analyst Jason Molins.
