Frank Greinke Jr., chief executive of SC Fuels in Orange, is set to have a public company under his wing.
SC Fuels, which distributes gas and lubricants for trucks and corporate fleets, is taking its gas station business public by selling them off.
The company is selling its Cardlock Fuels System Inc. unit to Texas-based United Fuel & Energy Corp., a publicly traded supplier of gasoline, diesel, propane and lubricants.
The deal’s set to wrap up this month.
As part of the deal, Grienke’s set to get a 51.5% stake,worth about $37 million,in the new company, which will take on the United Fuel name. He’ll serve as chairman.
United Fuel trades on the low profile Bulletin Board ex-change. It generates about $400 million in yearly revenue.
SC Fuels, which also distributes home heating oil, has an estimated $450 million in yearly sales. It will stay as a separate, privately held company, Greinke said.
“We’re really being pioneers with this deal,” Greinke said. “No one else in our industry is combining a privately held company with a public company.”
SC Fuels’ customers include Chevron Corp. and BP PLC’s Arco gas stations. The company counts about 350 workers in Orange County.
SC Fuels will supply fuel to United Fuel’s gas stations, said Chuck McArthur, United Fuels’ chief executive.
Twenty-three SC Fuels unattended gas stations are going to United Fuel. The stations generated $200 million in sales for the 12 months ended June 30.
Before the deal, United Fuel had more than 100 gas stations in Texas, New Mexico and Oklahoma.
United Fuel is looking to grow its market share to help compete in a consolidated industry with rising costs, McArthur said.
There are few publicly traded fuel companies, including Florida-based SMF Energy Corp., he said.
A good chunk of suppliers are independently operated and in some cases, family owned, as is SC Fuels.
The goal is to grow United Fuel and attract more investors so the company can move up to a bigger exchange such as the New York Stock Exchange or American Stock Exchange, Greinke said.
“We’re trying to increase shareholder value,” he said.
Selling off SC Fuels’ gas stations to a public company gives Greinke a chance to get his feet wet on Wall Street without jeopardizing the family business, he said. The sale is designed for growth, not as a way to cash out part of his holdings in SC Fuels, he said.
“I looked at this deal as a way for us to protect our family-owned business and yet still have the ability to access capital markets,” Greinke said.
The move “opens a lot more doors,” said Ken Jones, managing director of Newport Beach-based Lyndon Group LLC, a financial consultant who works with private and public companies.
“He can hold onto the business and watch it grow or sell it off without affecting the family business,” he said.
SC Fuels was started in 1930 as Southern Counties Oil Co. Frank Greinke Sr. bought the company in 1965. Son Frank Greinke Jr. has led the company since 1989. His children Cindy and Steven hold senior management positions.
The company has had interest from outside investors who wanted to take the company public. But that’s not an option for the family, according to Greinke.
“Very few family-owned business have the longevity that we have and that’s something to be proud of,” Greinke said. “We want to keep things going so that there’s an opportunity for future generations to come on board.”
