Casey's General Stores (CASY) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition of Fikes Wholesale Inc. and its 198 CEFCO stores expands presence in Texas, Florida, Alabama, and Mississippi, providing immediate scale and supporting regional growth strategies.

• The acquired stores are large-format, averaging over 4,800 sq ft, aligning with current build standards and facilitating kitchen installations for prepared foods expansion.

• The deal includes a dealer network, a fuel terminal, and a commissary, enhancing fuel procurement, distribution, and operational support in Texas.

• Supports a two-pronged growth approach, balancing organic growth and selective M&A, and aligns with top-quintile EBITDA growth objectives.

• Complements recent acquisitions and accelerates the three-year strategic plan, enabling the addition of 350+ new units by fiscal 2026, with a focus on the South.

Financial terms and conditions

• Gross purchase price is $1.145 billion, including $165 million in tax benefits; net after-tax purchase price is $980 million.

• 2023 pro forma adjusted EBITDA is $89 million, with a pre-synergy multiple of 11x, falling to 7.3x post-synergies.

• $35 million in one-time deal and integration expenses expected, with $20 million incurred at closing.

• Transaction funded through a mix of cash and bank financing, with pro forma leverage at 2.4x, targeted to reduce to 2x within 12 months.

• All-cash transaction, with financing from balance sheet cash and bank facilities.

Synergies and expected cost savings

• $45 million in annual run-rate synergies anticipated, about 50% of acquired EBITDA, mainly from kitchen installations, procurement scale, and operational efficiencies.

• Synergies include enhanced fuel procurement, increased inside store margins, and leveraging self-distribution and foodservice capabilities.

• Overhead and fuel synergies expected to materialize quickly; food and merchandising synergies will follow as stores are remodeled over several years.

• Significant margin uplift expected from introducing the pizza program, though final margin improvement depends on product mix.

• Acquisition expected to be EBITDA accretive in the current fiscal year.