FEMSA, a major Mexican conglomerate, has agreed to purchase the retail business of Delek US Holdings (NYSE:DK), Inc., a diversified downstream energy company. The deal, valued at $385 million, includes the acquisition of 249 convenience stores located primarily in Texas and New Mexico.
The transaction is expected to close in the late third quarter or fourth quarter of 2024. This marks FEMSA's entry into the U.S. convenience store market, expanding its retail footprint which currently includes over 30,000 locations in South America and Europe.
José Antonio Fernández Garza-Lagüera, CEO of FEMSA's retail operations, expressed enthusiasm for the company's U.S. market entry, noting the strategic significance of the acquisition. Avigal Soreq, Delek's President and CEO, also commented on the transaction, highlighting the value creation for stakeholders and the opportunity it presents for Delek US Retail employees as part of FEMSA's growth strategy.
Delek US Holdings' assets include petroleum refining, logistics, and convenience store retailing, with a total crude throughput capacity of 302,000 barrels per day across their refineries. The company also has an interest in the Wink to Webster pipeline and operates Delek Logistics Partners, LP (NYSE: NYSE:DKL), a midstream energy infrastructure asset company.
FEMSA operates OXXO, the largest small-format proximity store operator in the Americas, and has a significant presence in the beverage industry through Coca-Cola (NYSE:KO) FEMSA. The acquisition of Delek US Retail is aligned with FEMSA's ambition to grow its retail operations and enter new markets.
InvestingPro Insights
As FEMSA ventures into the U.S. convenience store market with its acquisition of Delek US Retail, a look at Delek US Holdings, Inc.'s financial health and market performance provides valuable context for the transaction. According to real-time data from InvestingPro, Delek US Holdings, Inc. has a market capitalization of $1.53 billion, indicating a significant presence in the energy sector.
InvestingPro Tips suggest a cautious outlook for Delek, with analysts having revised their earnings expectations downwards for the upcoming period. This may reflect concerns about the company's financial trajectory in the near term. Moreover, analysts anticipate a sales decline in the current year, which could be a factor in Delek's decision to sell its retail business and potentially streamline operations.
Despite these challenges, the valuation implies a strong free cash flow yield, which could be attractive to investors seeking value in the current market conditions. Additionally, Delek's stock is known to trade with low price volatility, providing a degree of stability amidst market fluctuations.
For readers interested in a deeper dive into Delek's financials and future prospects, InvestingPro offers a comprehensive suite of additional tips – with 9 more insights available that could further inform investment decisions.
InvestingPro Data also sheds light on Delek's recent performance. The company's revenue for the last twelve months as of Q1 2024 stands at $16.22 billion, though it has seen a decrease of 17.71% in revenue growth during the same period. The gross profit margin is relatively low at 5.79%, which aligns with an InvestingPro Tip highlighting the company's weak gross profit margins. These figures are crucial for investors to consider as they evaluate the impact of the FEMSA acquisition on Delek's financial health and strategic direction.
For those interested in the valuation metrics, Delek's price to earnings (P/E) ratio is currently negative at -20.31, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at -40.34, reflecting challenges in profitability. The price to book ratio stands at 1.78, which may offer insights into how the market is valuing the company's net assets.
The acquisition by FEMSA could mark a pivotal moment for Delek as it reshapes its business model and footprint in the retail sector, underlining the importance of staying informed on the latest financial data and expert analysis provided by InvestingPro.
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