Gasoline Refiner Tosco to Buy Circle K Chain, Doubling Sales

By EALENA CALLENDER

Feb. 17, 1996 12 AM PT

TIMES STAFF WRITER

Tosco Corp. agreed Friday to buy Circle K Corp. in a $900-million deal that would more than double Tosco’s gasoline sales and make it the nation’s largest operator of company-owned convenience stores.

The purchase is the latest in a stream of major acquisitions for Stamford, Conn.-based Tosco, which has aggressively expanded market share as other companies have pulled out of the volatile refining and marketing industry.

The merged company would have about 4,000 outlets, with gasoline sales of about 8 million gallons per day generating $11 billion in annual revenue.

Tosco, with about $7 billion in annual revenue, is one of the nation’s largest independent refiners and marketers of petroleum products.

Phoenix-based Circle K is the nation’s largest operator of company-owned convenience stores and the largest independent retailer of gasoline. It operates or franchises about 2,500 stores in 28 states.

“Circle K and Tosco fit together extremely well,” said Tosco Chairman and Chief Executive Thomas D. O’Malley. “This transaction advances our long-stated goal of becoming a major gasoline retailer and complements our petroleum refining and gasoline marketing business.”

Analysts said the acquisition is a positive move for Tosco.

“Tosco is growing its refining business, and to complement that they have to balance that with similar growth in the marketing side,” said Fadel Gheit, energy analyst at Fahnestock & Co. “Circle K will definitely give them what they are looking for.”

Also, the convenience store operations will give Tosco more stability, analysts said.

“It basically helps offset the volatility of refining margins,” said Ravi Kamath, research analyst at Jefferies & Co. “Whatever they lose on the refining side they make up on the retail side.”

Tosco, which in the last few years has bought significant operations from Exxon and British Petroleum, is likely to slow its acquisition pace for about a year following the latest purchase, analysts added.

Circle K launched an unsolicited offer in August for National Convenience Stores Inc. for $210 million. It raised its offer to $232 million, but was outbid in November by Diamond Shamrock Inc., which agreed to pay $260 million.

Under the agreement, Tosco would issue 6.5 million shares of stock, pay $427.5 million in cash and assume Circle K debt. The transaction is expected to be completed by June.

Circle K Stock rose $7.75 a share to close at $28.875 on Friday, and Tosco dropped 25 cents to $43.25, both on the New York Stock Exchange.

Tosco said it will continue to operate Circle K stores under their current name. Of Tosco’s 1,500 sites, about 350 are Tosco-owned outlets and only about 130 have convenience stores. Those locations will be converted to Circle Ks.

Tosco also supplies gasoline to 650 sites selling the BP brand on the West Coast and 500 in 11 Northeast states.

Tosco’s expects to move management of its retail operations, currently in Seattle, to Circle K headquarters in Phoenix.

Reuters contributed to this report.

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Marriage of Convenience

Tosco Corp.’s acquisition of Circle K Corp. would make it the biggest U.S. convenience store operator. A brief look at the firms:

Tosco Corp.

* Headquarters: Stamford, Conn.

* Chief executive: Thomas D. O’Malley

* Employees: 3,613

* 1995 revenue: $7.3 billion

* Type of business: Independent refiner, wholesaler and retail marketer of petroleum products.