Gas stations were once the province of solo operators, small stand alone businesses. Once, that is, but increasingly not any more.
In the last few weeks, Chestnut Petroleum, a tri-state gasoline wholesaler and distributor snapped up 18 prime retail station sites in the Hartford/New Haven area from Motiva Enterprises. Motiva, a Houston, Texas, marketer of Shell-branded gasoline in the eastern United States also assigned another 35 sites in Connecticut to CPD Parent Properties, a subsidiary of Chestnut Petroleum Distributors, Neither Motiva nor Chestnut would disclose the financial terms of the agreements.
Since December 2004, Motiva has quietly been selling off retail assets in an effort to focus on its wholesale business. Chestnut, in turn, was looking to fill up on gas stations.
According to Mark Block, Chestnut’s attorney in Connecticut, his client evaluated the deal on a site-by-site basis.
“These sites not only provide gasoline, but most have convenience stores attached,” he said. “This is definitely part of the trend away from your traditional gas station that used to get by with grease and oil jobs.”
Stu Crum, Motiva’s general manager for retail strategy and portfolio for North America, said Chestnut has been getting prime real estate.
“These sites aren’t ‘dogs,’” he said. “We’re selling A-1 properties — some of the very best corners of the country. Since the sites are already up and running they have a history. Chestnut is sitting on some pretty good dirt.”
Because Shell (a 50 percent owner of Motiva along with Saudi Refining Inc.) is focusing much of its growth interest in the Asian-Pacific area, Motiva has become capital constrained in the U.S.
Finding A Friend
“So, we decided our growth strategy would be through strategic partners,” Crum said. “We identified 23 markets. Hartford-New Haven was one of them. We believe we have strong partners and strong assets we could not only divest of, but grow in.”
Since 2005 Motiva has divested 17 of those markets and realized a major return from its former assets.
Growing through strategic partners like Chestnut may be part of Motiva’s strategy yet Motiva still depends on long-term supply commitments.
“Our ultimate goal is to be the supplier of choice to wholesalers across the U.S.,” Crum said. “Once these supply agreements run out we’re confident wholesalers will re-up with us.”
And, since Shell historically has prime real estate on some of the best corners of the country, Chestnut doesn’t need to develop the facilities. The sites it acquired are already up and running.
It’s bad news, however, for the Mom and Pop gasoline retailer; those who aren’t growing are finding it difficult to compete.
“It’s similar to what’s happened with pharmacies,” Crum said. “Like CVS, Chestnut has grown significantly through acquisitions of individual stores. In our business with profit margins getting slimmer it’s either grow or be purchased.”
Steve Guveyan, executive director of the Connecticut Petroleum Council, views the transaction favorably for Shell customers.
“It’s clear Motiva wants to keep the Shell brand in Connecticut,” he said. “It’s still Shell gasoline, but it will be distributed by somebody other than Shell. The only real change is ownership of the station. It’s unlikely the customer at the pumps will notice anything different.”
