Fomento Económico Mexicano, S.A.B. de C.V. (FEMSA), owner of the well-known Mexican convenience store chain OXXO, announced its entry into the U.S. market following an agreement with Delek US Holdings, Inc. to acquire its retail operation, which includes 249 convenience stores.
The stores operating under the DK brand will be acquired for $385 million, informed FEMSA.
FEMSA is one of Mexico’s largest conglomerates, operating in over 17 countries. Through its Proximity and Health Division, FEMSA operates OXXO, the largest small-format convenience store chain in the Americas. It has over 22,800 stores in five countries, including Mexico, Colombia, Chile, Peru, and Brazil.
The acquisition of the Delek US Retail stores opens the door for OXXO to expand its operations in the United States.
“At FEMSA, we have a long-held ambition to enter the US convenience and mobility industry, and this transaction represents the ideal way for us to take our first step in this compelling market,” said José Antonio Fernández Garza-Lagüera, Chief Executive Officer of FEMSA Proximity and Health.
“We have been building and expanding our retail operation in Mexico for over 45 years, eventually reaching ten other countries in South America and Europe, and a store base of more than 30,000 locations. As we welcome our new DK colleagues into the FEMSA family, we are excited to embark on this new and important journey together,” added Mr. Fernández Garza-Lagüera.
Related Article: The Number of Convenience Stores in the U.S. Continues to Grow
According to Delek, approximately 90% of the convenience stores acquired by FEMSA are located in Texas. The remainder are located primarily in New Mexico, with a small presence in Arkansas.
Nearly all stores operate a gas station under the DK and Alon fuel brands. The transaction also includes a small fuel transportation fleet.
Delek US Holdings, Inc., is a diversified energy company with assets in oil drilling, logistics, pipelines, renewable fuels, and convenience store retailing.
The Move Into the U.S. Market with OXXO
With an addressable market of over $850 billion, over 150,000 locations, and significant fragmentation, the US convenience and mobility market is attractive for operators with the right capabilities and sufficient scale.
For FEMSA, this market offers a high strategic fit and presents an opportunity to build a platform that, over time, has the potential to achieve scale and create shareholder value.
Delek stores have the right attributes to be FEMSA’s first step on this journey in terms of size, geographical footprint, and the possibility of extensive experimentation, testing, and fine-tuning of the Company’s convenience value proposition.
Through OXXO, FEMSA said it has built considerable experience and expertise in developing core retail capabilities for store expansion, procurement, supply chain, segmentation, and pricing. These capabilities will be invaluable as the company launches and pursues its US convenience strategy.
While the strategy is ultimately broader than any single region or target demographic, the appeal of the OXXO brand may be relevant in certain markets served by the DK stores.
Avigal Soreq, President and CEO of Delek, said: “The sale of Delek US Retail to FEMSA is an incremental step in our commitment to unlocking the sum of the parts’ value inherent in our system. We are pleased with this transaction and expect to execute additional steps to unlock value for our stakeholders.”
The transaction is subject to customary regulatory approvals and is expected to close during the second half of 2024.