Locke snaps up Motor Fuels Group for £40m and targets 200 petrol stations

SCOTTISH oil tycoon Alasdair Locke plans to quadruple the size of his petrol forecourt business to 200 sites following the acquisition of Motor Fuels Group (MFG).

Locke is backed by private equity firm Patron Capital, who are majority shareholders in the venture. The group also secured debt funding from Investec Bank to acquire the petrol stations for an estimated £40 million from the former MFG owners, Sharad Raja and Sailesh Sejpal.

Patron took over Scottish five-a-side firm Powerleague in 2009. In November, it teamed up with Royal Bank of Scotland’s West Register vehicle to buy Jarvis Hotels out of administration for £111m.

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Tim Allan, a director of Scottish Capital Group who took a non-executive director role with MFG, said the group was to become a “business of scale” with 200 forecourts due to the level of private equity and debt the firm has behind it.

Allan said: “Petrol stations is an incredibly diverse market. About 65 per cent is in the hands of small family groups. We have bought the fifth biggest independent chain and that is only 48 stations. There is an opportunity to consolidate at the bottom end.

“Small mum and pop operations of ten to 12 units are finding oil prices have been fluctuating and retail is getting tougher. And the banks are not being more supportive, they are being less supportive.

“There is opportunity for a more disciplined institutional style business like ours backed by private equity and low gearing buying these type of forecourts. We are very acquisitive. You don’t go to all this effort for just 48 stations.”

However, it is understood that the group has ruled out – for the time being – an acquisition the petrol station operator Calanike Retailing.

Calanike, along with soft drinks maker Sangs, fell into administration last week. The failure was attributed by its owner, Scots entrepreneur Kenny Webster, to its lenders, the troubled Allied Irish Bank (AIB).

The bank’s move to put the firm into administration sparked an outcry that prompted enterprise minister Fergus Ewing to hold “urgent talks” with officials from AIB, amid concerns it acted too quickly.

Last year AIB, which was effectively nationalised and saved from collapse by emergency European Central Bank funding, announced a ¤10.4 billion (£8.6bn) full-year loss. The 2010 deficit, a company record, was more than four times higher than the ¤2.3bn loss of 2009.

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Allan said that for now the consortium would focus on MFG and it would make acquisitions “on a very selective basis”.

The MFG deal is not the first time Locke has moved into the petrol forecourt business. In 2008, he led a consortium of investors that acquired Petrol Express – which included 63 filling stations – from GNE Group for £52m. In 2007, Locke became one of Scotland’s richest people when he sold his Aberdeen-based Abbott Group to US private equity group First Reserve for £900m.