Dive Brief:
- Arko Corp., parent company of c-store giant GPM Investments, has submitted a successful bid of $49 million to acquire bankrupt retailer Mountain Express Oil Co., according to documents filed with the U.S. Bankruptcy Court for the Southern District of Texas.
- The proposed transaction would see Arko acquire all of Mountain Express’ assets except for any owned real estate, according to court documents. This includes Mountain Express’ company-operated leased c-stores and travel centers, as well as fuel supply agreements with over 800 retailers.
- The companies still have hurdles to clear to complete the deal, as Mountain Express’ debtor-in-possession (DIP) lenders have yet to agree to the terms. As of Aug. 8, the case is in mediation.
Dive Insight:
Arko’s successful bid comes nearly five months after Mountain Express filed for Chapter 11 bankruptcy protection and announced it was exploring a sale of its assets. At the end of April, the retailer received more than $37.8 million in debtor-in-possession financing to pay certain costs, fees and expenses related to its case and to help find a buyer.
Selling its assets to Arko would allow Mountain Express to execute “an orderly winding-down” of its business while keeping most of its team members employed, a representative for Arko wrote in the official proposal. Arko would expect the transaction to close within 60 to 90 days of it being approved.
The purchase would notch a key win for Arko, which failed several times earlier this year to acquire TravelCenters of America. TA was officially acquired by oil giant BP for $1.3 billion in May.
“Additionally, we believe that our proposal will provide the opportunity for the hundreds of [Mountain Express] dealers to continue to operate their small businesses at the stations and provide for employment of their thousands of employees, as opposed to causing the creditors, employees, the dealers’ small businesses, and other [Mountain Express] stakeholders to be subject to a Chapter 7 liquidation,” Arko’s representative wrote.
There is no estimated timeline for how long the case will remain in mediation. In an Aug. 4 call that included Mountain Express’ advisors and lenders, as well as representatives from Arko — including president and CEO Arie Kotler — one of the lenders, John Elrod, vice chair for law firm Greenberg Traurig representing First Horizon Bank, expressed opposition to the proposal.
Elrod noted that Mountain Express did not consult its lenders regarding the adjournment of the auction, and proceeded without the DIP agent’s consent.
“Based on what we know today as the bid has been described, it is clear that the bid does not pay the secured lenders in full,” Elrod said. “The DIP agent, therefore, objects to [Mountain Express’] proposed sale.”
Mountain Express received 16 bids for its assets, and six participated in the auction. GPM’s offer was the “highest and best proposal” of the group, Geoffrey Richards, senior managing director of Raymond James, the court-approved investment banking company, said during the call.
Founded in 2000, Alpharetta, Georgia-based Mountain Express Oil distributes fuel to 855 locations around the country, including 27 travel centers, and operates about 171 retail stores. The retailer filed for bankruptcy about 17 months after it completed a $205 million debt financing to support its growth initiatives, which included reaching 100 company-operated stores by the end of 2021.
Richmond, Virginia-based Arko operates more than 1,500 c-stores in 33 states under a variety of brands through GPM Investments, including E-Z Mart, Breadbox, ExpressShop and Pride.
