Delek US Holdings has agreed to sell its retail business to Mexico’s FEMSA, a multinational beverage and retail company, for $385 million cash, Delek said on Aug. 1.

Delek US Retail is a leading convenience store chain with 249 corporate stores operating primarily in the southwestern U.S. with locations in Texas and New Mexico. Delek operates company stores under the DK brand.

TD Cowen analysts said the retail business’ divestiture was likely at the low end of expectations.

“DK did not provide a deal multiple,” Cowen analyst Jason Gabelman said in an Aug. 1 report. “DK has earned $46MM annual EBITDA the past 3 years, implying a 8.4x multiple.”

Investors were likely expecting a multiple ranging between 8x and 10x, Gabelman said.

“We assume a tax basis of half the sales price resulting in some tax leakage. Retail sustaining capex is a modest ~$8MM/yr, implying ~$30MM/yr cash flow and a 9% yield on the deal price accounting for tax leakage,” Gabelman said.

Avigal Soreq, Delek’s president and CEO, said the sale of Delek US Retail is an incremental step “in our commitment to unlock the sum of the parts value inherent in our system.”

“Importantly, it allows us to gain a competitive partner for ongoing and expanded retail fuel sales,” Soreq said. “We look forward to building on this partnership with FEMSA in both the short and long-term. The transaction creates an exciting opportunity for Delek US Retail and its employees as they become part of FEMSA’s growth strategy in the United States.”

FEMSA is one of Mexico’s largest conglomerates with operations in more than 17 countries. FEMSA’s Proximity & Health Division operates OXXO, the largest small-format proximity store operator in the Americas, with more than 22,800 stores in five countries including Mexico, Colombia, Chile, Peru and Brazil.

Delek said the transaction is expected to close sometime late in the third quarter or fourth quarter of this year.

Delek’s exclusive financial adviser was Raymond James & Associates, and Baker Botts LLP served as legal counsel.

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