CD&R buys MFG for £500m from Patron Capital

Sale provides exit for property specialist Patron Capital Group

Clayton, Dubilier & Rice (CD&R), the New York private equity firm, has agreed to acquire UK convenience retail operator Motor Fuel Group (MFG) for £500 million ($761.3 million) from London's Patron Capital Partners, according to a joint statement by the private equity groups.

The acquisition gives CD&R control of the second largest independent petrol and convenience store operator in the UK, with 373 locations. Last year, MFG posted more than £1bn in pro forma turnover for 2014 from its shops, which have partnerships with Costa Coffee and Costcutter and also sells fuel under the BP, Shell, Texaco and Jet brand names.

“Together with the management team and Alasdair Locke, we have succeeded in taking a complex property-backed business, driving operational efficiencies and rapidly transforming the Company into a stable, profitable operating platform with potential for future growth,” said Stephen Green, senior partner at Patron, discussing MFG's growth under the private equity group's four year ownership period.

As part of the deal, Alasdair Locke will remain chairman of MFG and Sir Terry Leahy, a senior advisor to CD&R who is the former chief executive of Tesco and present chairman of B&M European Value Retail, will join the company's board.

CD&R partner David Novak said of the acquisition that MFG is well-positioned and growing amid “a competitive environment that favours independent operators.”

Patron purchased MFG in 2011 when it had just 48 locations. Following its investment, MFG grew its number of store locations through a series of acquisitions. For the UK private equity house, the deal is not unusual. Patron is a specialist in acquiring businesses with distressed or undervalued property.

The convenience store industry has proved a darling for North American financial sponsors as well. In August 2010, Catterton Partners of New York acquired Richmond, Va.-based Mid-Atlantic Convenience Stores, which subsequently rolled up purchases of other fuel and retail convenience stores. Three years later, Catterton sold the business to a unit of Philadelpia gas stop store operator Sunoco Inc. for an undisclosed sum.

Pending regulatory approval, the CD&R acquisition is expected to close in July.