Dive Brief:
- Convenience and fuel retailer Delek US Holdings once again told shareholders it’s exploring M&A opportunities around its retail, refining and logistics businesses, although there are no solid plans yet, President and CEO Avigal Soreq said during Delek’s earnings call Monday.
- This comes amid another down period for Delek’s retail business. For the second straight quarter, Delek’s retail segment dipped in adjusted EBITDA year over year, falling from $10.3 million in Q1 2022 to $6.4 million last quarter, according to Delek’s earnings report.
- During Delek’s previous earnings call in March, Soreq told shareholders that an M&A move was in play for the company’s retail and logistics arms, noting “you can go big all the way or you’re almost not relevant.”
Dive Insight:
When Delek teased a move of its retail assets back in March, Soreq said that while the company won’t pursue a transaction that would risk Delek’s total cash flow, everything was on the table.
Delek’s approach doesn’t appear to have changed. On Monday’s earnings call, both Soreq and Executive Vice President of Corporate Development Mark Hobbs said Delek sees opportunities, but is focused on making a move that positions the company for accretive growth and financial flexibility.
“We continue to make, in our minds, meaningful progress, but we all understand that those types of transactions take time,” Soreq said. “And more than anything, we want to get it right.”
While Soreq declined to offer shareholders a timeline of when it expects to reveal its M&A plans, the executive said he hopes to do so “sooner than later.”
“I'm more aggressive than you, and I want it more badly than you [do],” he said. “We are on the same side of the equation.”
Delek’s interest in a potential sale or an acquisition can be traced back a couple of years. In January 2021, petroleum refiner CVR Energy — which had a 15% stake in Delek at the time — urged the company to sell its retail assets, among other business changes, as part of a “desperately” needed new direction. Delek’s leadership denied this request. In its third-quarter earnings report last November, Delek said it took various steps towards its “key priorities,” and began working with bankers “to advise on potential strategic options.”
If a move happens this year, Delek wouldn’t be the first big oil company to take part in the red-hot M&A trend that’s disrupting the c-store industry. In February, BP agreed to acquire TravelCenters of America for $1.3 billion in a move that’s expected to close next week.
Inside the store, Delek’s total merchandise sales gained about 6% during Q1, growing from $69.7 million to $73.9 million, while merchandise margins dropped from 34.6% to 33%.
Brentwood, Tennessee-based Delek operates nearly 250 convenience stores in West Texas and New Mexico.
