Arko Petroleum pitches total return on US$200m IPO
Arko Petroleum raised US$200m from its Nasdaq IPO late Wednesday, but only after upsizing the deal to offset pricing at the bottom end of the marketed range.
UBS, Raymond James and Stifel priced 11.1m shares at US$18.00, an increase from the originally marketed 10.5m shares at US$18–$20. The outcome reflected a top-heavy order book, with half the deal placed with just five institutions and 75% with the top 10, according to bankers involved.
Shares of the wholesale gasoline distributor slipped below issue to US$17.40 when trading opened on Thursday.
Arko Petroleum was spun off from convenience store operator Arko Corp, with the parent retaining a 76% stake.
A key component of the Arko Petroleum investment thesis is a total-return strategy built on dividends and continued acquisition-driven growth.
The company is paying an interim quarterly dividend of 26 cents to shareholders of record on April 21 and plans to implement a regular 50-cent quarterly dividend. At the US$18 IPO price, that equates to an 11.1% annualized yield, above the 9.4% yield offered by public comparable CrossAmerica at its current share price and payout.
Proceeds from the offering will be used to repay a portion of the US$380.8m outstanding on Arko Petroleum’s revolving credit facility, reducing leverage to 1.2x Ebitda. The company has said it intends to maintain leverage below 2.5x.
The dividend commitment equates to 80% of discretionary cashflow, while remaining cashflow combined with bank borrowings could support future acquisitions, a core component of its historical growth strategy.
Arko Petroleum purchases gasoline from independent refiners that it distributes to nearly 3,500 stations, including 1,158 operated by parent Arko, 2,053 by third-party dealers, and 288 to unstaffed cardlock locations. It earns about six cents per gallon distributed.
Arko Petroleum last year generated US$142m–$145m of adjusted Ebitda, with about 60% converted to discretionary cashflow.
For the full-year 2026, the company estimates that it will generate adjusted Ebitda and discretionary cashflow of US$156m and US$110m, according to its offering documents, a disclosure not uncommon for high-dividend paying IPOs.
Both Arko Corp and public shareholders will participate in dividends and future growth.
The parent is restricted from selling the 35m shares it retained for 180 days, after which it has flexibility to sell shares on the open market, spin off to shareholders, or retain.