The Pantry Inc., the leading independently operated convenience store chain in the southeastern U.S., said it reached a deal to acquire 40 convenience stores from Herndon Oil Corp. The Sanford, N.C., chain also announced it repurchased $26 million in principal amount of outstanding bonds.
The acquisition, which will include the real estate underlying 32 of the 40 locations, is expected to be funded with cash on hand. Thirty-two of the stores are in Mobile, Ala., six are in Florida and the remaining two are in Mississippi and Louisiana. The stores operate under a variety of names, including the Flamingo banner and generated revenues of approximately $189 million during the 12 months ended June, 2008. The acquisition, which is subject to regulatory approvals and other customary closing conditions, is expected to close in the second half of fiscal 2009.
“This acquisition fills a gap in our existing store base and represents our initial entry into the attractive Mobile market,” said The Chairman and CEO Pete Sodini. “We expect this transaction to be accretive to our earnings per share in the first 12 months after closing.”
Additionally, The Pantry reported that during the second fiscal quarter, it repurchased $26 million in principal amount of its outstanding bonds, consisting of $23 million of its 3.0% Senior Subordinated Convertible Notes and $3 million of its 7.75% Senior Subordinated Notes, for an aggregate purchase price of approximately $19 million. As a result, the Company will include a pre-tax gain of over $6 million on the extinguishment of debt in its financial results for the quarter, which will be reported in early May.
“We believe the repurchase of outstanding bonds at a discount and the pending acquisition both represent high-return investments on behalf of our shareholders and are key steps forward in executing our balanced strategy of reducing debt while growing the business,” Sodini said.
The Pantry currently operates 1,648 stores in 11 states under select banners including its flagship Kangaroo Express brand.