Top Line in talks to acquire 38 service stations ahead of IPO

According to a “source familiar with the deal”, InsiderPH [link] is reporting that Top Line [TOP] has made a deal to acquire 38 service stations from a local operator ahead of its IPO. The source mentioned that the deal would also include two depot facilities. The acquired service stations supposedly have an annual sales rate of 28 million liters, which, when added to TOP’s 68 million sales rate, would increase TOP’s annual volume by 41% to 96 million liters. The new stations built with the IPO proceeds would then push TOP’s estimated annual volume above that psychological 100-liter mark.

MB bottom-line: That’s a pretty big deal, considering the revamped prospectus places an almost singular focus on using the proceeds to build service stations, and even then, they were “only” going to build 20 using IPO cash. Adding 38 to the network through a buyout is a great way of juicing network growth, but I think the devil is in the details. The “Service Station King” is Petron [PCOR 2.38, up 0.4%], but it’s not like their service station network gives shareholders something that’s more than the sum of its parts. Fuel distribution is a tough game. Adding stations isn’t good for its own sake, especially if the added stations are poorly located, or the deal is structured in a way that exposes the company to debt problems down the line. I love aggression, and I appreciate TOP’s positioning as a pure fuel distribution play without any of that PCOR cruft or PNX baggage. 

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