FEMSA TO ENTER U.S. C-STORE INDUSTRY THROUGH ACQUISITION OF DELEK US’S RETAIL OPERATIONS

Monterrey, Mexico-based Fomento Económico Mexicano, S.A.B. de C.V. (FEMSA) has entered into definitive agreements with Delek US Holdings Inc. to acquire Delek’s retail operations, consisting of 249 convenience stores located mainly in Texas, for a total amount of $385 million on a cash-free, debt-free basis, including the purchase of inventories.

Delek is a downstream energy company with a focus on petroleum refining; its retail operations are being carved out for this transaction.

Operating under the DK brand, approximately 90% of Delek’s convenience stores are in the state of Texas, with the remaining sites located mostly in New Mexico and a small presence in Arkansas.

Almost all stores have a gas station under the DK and Alon fuel banners; the transaction also includes a small fuel transportation fleet.

With a total addressable market of more than $850 billion, more than 150,000 locations and significant fragmentation, the US convenience and mobility market is attractive for operators with the right capabilities and sufficient scale.

For FEMSA, the fragmented U.S. market offers high strategic fit and presents an opportunity to build a platform that, over time, has the potential to achieve scale and create shareholder value.

The Delek stores have the right set of attributes to be FEMSA’s first step on this journey, in terms of size, geographical footprint, and possibilities for extensive experimentation, testing, and fine-tuning of the Company’s convenience value proposition.

Through its OXXO convenience stores, FEMSA has built considerable experience and expertise developing core retail capabilities for store expansion, procurement, supply chain, segmentation and pricing, and these capabilities will be invaluable as the company launches and pursues its U.S. convenience strategy, it said.

While the strategy is ultimately broader than any single region or target demographic, the appeal of the OXXO brand may be relevant in certain markets served by the DK stores.

“At FEMSA, we have a long-held ambition to enter the U.S. convenience and mobility industry, and this transaction represents the ideal way for us to take our first step in this compelling market,” José Antonio Fernández Garza-Lagüera, CEO of FEMSA’s retail operations, said.

“We have been building and expanding our retail operation in Mexico for over 45 years, eventually reaching ten other countries in South America and Europe, and a store base of more than 30,000 locations.

As we welcome our new DK colleagues into the FEMSA family, we are excited to embark on this new and important journey together.”

Avigal Soreq, president, and CEO of Delek, said, “The sale of Delek US Retail to FEMSA is an incremental step in our commitment to unlock the sum of the parts value inherent in our system.

We are pleased with this transaction and expect to execute on additional steps to unlock value for our stakeholders.

Importantly, it allows us to gain a competitive partner for ongoing and expanded retail fuel sales. We look forward to building on this partnership with FEMSA in both the short and long-term.

The transaction creates an exciting opportunity for Delek US Retail and its employees as they become part of FEMSA’s growth strategy in the United States.”

The transaction is subject to customary regulatory approvals, and the companies expect it to close during the second half of 2024.

FEMSA participates in the retail industry through a Proximity Americas Division, operating OXXO, a small-format store chain, and other related retail formats, and Proximity Europe which includes Valora, its European retail unit which operates convenience and “foodvenience” formats.

OXXO has more than 22,800 stores in five countries, including Mexico, Colombia, Chile, Peru and Brazil.

In the retail industry it also participates though a Health Division, which includes drugstores and related activities and Digital@FEMSA, which includes Spin by OXXO and Spin Premia, among other digital financial services initiatives.

In the beverage industry, it participates through Coca-Cola FEMSA, the largest franchise bottler of Coca-Cola products in the world by volume. Across its business units, FEMSA has more than 392,000 employees in 18 countries.

• Delek US Holdings is No. 31 on CSP’s 2024 Top 202 ranking of U.S. convenience-store chains by store count.

Delek US Holdings is a diversified downstream energy company with assets in petroleum refining, logistics, pipelines, renewable fuels and convenience store retailing.

The refining assets consist primarily of refineries operated in Tyler and Big Spring, Texas, El Dorado, Arkansas, and Krotz Springs, Louisiana with a combined nameplate crude throughput capacity of 302,000 barrels per day.

Pipeline assets include an ownership interest in the 650-mile Wink to Webster long-haul crude oil pipeline.

The convenience-store retail segment operates approximately 250 convenience stores in West Texas and New Mexico.

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