Murphy USA has announced the acquisition of QuickChek, a convenience stores chain operator, in an all-cash deal worth $645 million.
The deal includes an expected tax benefit of $20 million, the company said. Shares of Murphy, a gas station and convenience store operator, are down 1.3% in Tuesday’s pre-market session, after closing about 2% higher on Monday.
Murphy (MUSA) will finance the deal using a combination of cash, existing credit facilities and debt. Further, the transaction, which is expected to close in the first quarter of 2021, is likely to be accretive to 2022 earnings. Murphy said, “Annual run rate synergies of $28 million are expected to be achieved by the third year.”
Murphy’s CEO Andrew Clyde said, “In October we outlined an updated capital allocation strategy and committed to improving our food and beverage offer at existing and future sites.” He added that “This transaction greatly accelerates those efforts and benefits, and is expected to provide reverse synergies across our network, while enhancing future returns on new stores.” (See MUSA stock analysis on TipRanks)
On Dec. 1, Goldman Sachs analyst Bonnie Herzog initiated coverage on the stock with a Sell rating and a price target of $127 (0.6% downside potential). Herzog believes that there will be an elevated risk as the company is trying to expand faster into the foodservice and beverages markets. Furthermore, the analyst cited Murphy’s “limited experience” in acquisitions, adding that the company could face a lot of execution risk.
Meanwhile, the Street has a cautiously bearish outlook stock with a Moderate Sell analyst consensus. The average price target stands at $135 and implies upside potential of about 5.7% to current levels. Shares have increased by 9.2% year-to-date.
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