London-based venture capital group TDR Capital, which already owns European Forecourt Retail Group (EFR-Group), has agreed to take a minority stake in Euro Garages that values the overall business at £1.3bn. The deal, which would mean chief executive Zuber Issa and managing director Mohsin Issa would continue to own a majority of Euro Garages and lead the business, will close in December pending regulatory clearance.
EFR-Group owns more than 1,100 sites in Benelux and France, and was bought by TDR Capital last year. Euro Garages' commercial director Ilyas Munshi said it was expected that a merger between the two businesses would take place next year, and he did not deny press reports that the company might look to the New York Stock Exchange for finance in the future.
Commenting on the deals, he said: "It's a strategic alliance with a lot of synergies between the two businesses. We want to be trans-global, and they can help us with that; and they want to introduce the way we work into their estate.
"They already operate in four European markets and we would like to work there and in other European countries.
"They want to replicate our business model of working with other convenience brands."
Euro Garages has a strong relationship with Spar for its retail offer, as well as Starbucks, Greggs and Subway; while EFR-Group works with Carrefour and Delhaize in its markets, but Munshi said he was open minded about future partnerships. He explained: "Whichever country we go into we will want to work with the convenience operators that consumers are looking for in that market."
He said the fact that the two companies worked with some of the same oil companies was not a major issue in the deal.
"They work with BP, Esso and Texaco. We work with BP, Esso and Shell, but the fuel side is less important to the deal than the convenience retail offer on the forecourt."
He said no decision had been made about plans for branding the business and whether European consumers would be seeing the Euro Garages logo on their forecourts. "It is too early to say whether forecourts would operate under the Euro Garages brand, or whether we will need to re-brand. It has not been considered yet."
Euro Garages' chief executive Zuber Issa said: "We are delighted to have on board a partner with the background and experience that TDR has. This is an exciting new phase for the business and we look forward to working with TDR to grow our business further in the UK and internationally."
Managing director Mohsin Issa added: "Over 15 years we've built our business and a strong position in the UK forecourt retail market with our superior customer offer supported by partnerships with leading convenience and food-to-go brands. TDR understands our business and is the perfect investment partner as we continue to develop our proposition."
Euro Garages and EFR-Group share a similar history of rapid growth in site numbers. Blackburn-based Euro Garages was founded in 2001 by brothers Mohsin and Zuber Issa with the acquisition of a single petrol filling station in Bury, Greater Manchester.
Within 10 years they had accumulated nearly 70 sites and in July 2011 the company opened its first motorway services on the M61 in Lancashire Rivington Services. The £12.3m project featured Starbucks, Subway, Burger King and Spar together with glazed foodcourt areas.
The growth accelerated further when Esso and Shell decided to sell off company-owned sites and Euro Garages was successful in bids for several packages. It had grown to 180 sites by March 2015 before nearly doubling in size again after deals to buy 104 Esso sites and 68 Shell sites took it to above a total of 350.
During its development it has acquired a reputation for high quality sites, winning the Forecourt Trader of the Year award for its Beehive site in Blackburn in 2011 and then for its Calder Park Service Station in Wakefield in 2013, as well as a host of regional titles.
EFR-Group's rapid expansion dates back to May 2007 when the company, then known as Delek Europe, was established.
Three months later its first acquisition of substantial operations was through the purchase of the retail arm of Texaco in Belgium, Netherlands and Luxembourg, which had 870 stations.
Then in October 2010 it purchased BP's retail operations in France comprising 412 stations. Two years later Delek signed an agreement with Esso to acquire about 40 unmanned fuel retail sites. In August 2014 TDR Capital bought Delek Europe and in February this year Delek Europe changed its name to European Forecourt Retail Group, more usually known as EFR-Group.
TDR Capital describes itself as a leading private equity firm with over 4.8bn of committed capital. It says it invests in medium-sized, European businesses, and partners with them to develop and grow their operations.
In the case of EFR-Group it says it had been following the downstream fuel and convenience retail and highway service station space for some time, and it identified EFR-Group "as having operational enhancement opportunities where we could leverage our expertise in building consumer-facing, multi-site businesses".
The business currently manages sites under the BP, Texaco and Esso fuel brands and its proprietary 'Go' brand, as well as licensed third-party brands such as Delhaize and Carrefour, for its non-fuel offer.
EFR-Group has approximately 2,400 employees and has its headquarters in Breda in the Netherlands.
Private equity fuelling growth in the sector
TDR Capital is not the first private equity company to invest in a Top 50 Indies company. Late in 2011 MFG's management teamed up with Scottish oil tycoon Alasdair Locke and private equity group Patron Capital to take ownership of the business.
Then in June this year, MFG announced that private investment firm Clayton, Dubilier & Rice (CD&R) would be partnering with the management of MFG to acquire the company from Patron, in a transaction valued at approximately £500m.
When the MFG management team partnered with Patron in 2011 to acquire the MFG business, it was ranked fifth in the Forecourt Trader Top 50 Indies with 58 sites. Today, it is ranked second. Through a series of acquisitions, Patron and MFG management grew the company to its current total of around 370 stations operating under the BP, Shell, Texaco and Jet brands. In addition, MFG also operates the Murco-branded dealer network of more than 200 sites. In April 2015, MFG was ranked ninth in a league table of Britain's 100 private companies with the fastest-growing profits in the 16th annual Sunday Times BDO Profit Track 100.
At the time of the latest takeover, Jeremy Clarke, managing director of MFG (right), said: "We thank Patron for helping us to become one of the largest, most dynamic and profitable independent petrol and convenience retail operators in the UK and we are excited to be partnering with CD&R. The firm's reputation for operational excellence and deep consumer and retail experience will be especially useful as we move the business forward to the next stage of profitable growth."