Dublin-headquartered petrol forecourt retailer Applegreen’s (APGN:AIM) shares are currently suspended following the exciting news (2 Aug) it is to acquire a majority holding in UK motorway service operator Welcome Break.

Being financed through €300m of new debt and a minimum €100m equity raise, the deal will turn Applegreen into a leading Motorway Service Area (MSA) operator in the UK as well as Ireland and will yield a step change in its scale and earnings.

Already a major petrol forecourt retailer with operations spanning the Republic of Ireland, UK and US, Applegreen is acquiring a 55% stake in Welcome Break in a reverse takeover under the AIM rules.

One of the three dominant UK MSA owners and operators, Welcome Break generated £723.4m sales and £66.4m of adjusted earnings in the year to January 2018; one interesting strand to Welcome Break’s growth has been the installation of electric vehicle superchargers.

Speaking to Shares, Applegreen’s management explained the deal will help the company achieve critical mass in the large, stable UK market, while deepening Applegreen’s exposure to non-fuel food and beverage sales.

Specifically, Welcome Break will add new brand partners including KFC, Starbucks, Waitrose, Pret-a-Manger and Pizza Express to existing brand partnerships with Costa and Burger King.

Welcome Break, whose sites attract roughly 85m motorway customers a year, is a well invested and cash generative infrastructure business which significantly broadens Applegreen’s network of MSAs with high entry barriers to competition.

‘It reduces our dependence on fuel,’ explains CFO Niall Dolan, pointing out Welcome Break is ‘the most well-regarded player in the market’ and pointing out that ‘only 17% of their gross profit comes from fuel sales.’

Guided by CEO Bob Etchingham, Applegreen’s management also sees potential to boost the enlarged group’s earnings by driving through operational efficiencies and synergies.

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