Soros Runs to Corner Store

Citing the need for acquisition capital in order to expand its presence throughout the Southeast U.S., Convenience USA Inc. of Durham, N.C., raised approximately $15 million in private equity last month from Soros Private Equity Partners LLC.

The Shattan Group of New York placed the offering on behalf of the company, said Kevin Fechtmeyer, managing director. The convertible preferred stock transaction consists of two equal tranches of $7.5 million. The first tranche closed at the time the deal was consummated and the second tranche will close upon the achievement of undisclosed performance hurdles by Convenience USA.

Immediate proceeds from the transaction were used to complete the latest in a series of acquisitions that saw Convenience USA increase the number of stores it held in its arsenal to 253 from 100. And Fechtmeyer said these steps were the latest in a spree of deals the convenience store operator had made since launching in February 1998. The company has stated the long-term goal of acquiring 1,000 companies within the Southeast.

“There is not a lot of new building going on in the convenience industry,” Fechtmeyer said. “The smart money is opting to buy rather than build.”

Donald Draughon, chief executive officer of Convenience USA, said the company has established North Carolina, Georgia, Florida and Alabama, and he said the company would like to fill in operations within these states and add stores in South Carolina, Virginia and Tennessee.

Convenience USA has regular revenue, and Fechtmeyer said that made leverage readily available for additional acquisitions. The comfort level felt by lenders is attributable to the steady cash flow realized by convenience stores. Draughon said Convenience USA has arranged securitized loans on each of its acquisitions through Enterprise Mortgage Acceptance Corp. of Westport, Conn.

To date, the company primarily has focused its acquisitions on rural and highway stores, which typically offer traditional store layouts and services, including gasoline, food service and merchandise. All but two of the company’s stores, which average 2,400 square feet, provide gas and six of the locations offer fast food service.

Regarding future financing plans, Draughon said the company will likely require additional capital, although he did not specify what form that funding would take. The long term plan is for an initial public offering.

“We’ll wait for the day when dotcoms have to make some money, and then go public,” Draughon said.