SHEFAYIM, Israel -- Alon Israel Oil Co. Ltd. entered the U.S. market two years ago with the $150 million purchase of the U.S. assets of Total Fina Elf SA, which included a refinery in Big Spring, Texas, a pipeline system running through the Southwest and a marketing network of 1,600 Fina-branded stations.
The refinery produces 60,000 barrel per day with plans to push that capacity to 75,000 bpd, says David Spott, vice president of marketing for Alon USA. Fina has roughly 150 independent distributors. Adding the direct-op locations from the purchase last year of Odessa, Texas-based Southwest Convenience Stores and its 172 sites, the Fina flag flies in seven states: Texas, Oklahoma, Arkansas, Louisiana, New Mexico, Colorado and Arizona.
Initially, Alon purchased part ownership of the SCS chain, but as of May 2001, the company bought its partners out. While bringing in an executive from Alon Israel to lead SCS as CEO, the company essentially kept the chain’s original management team in place.
The move to the U.S. was part of a growth strategy for Alon Israel, says David Wiessman, president and CEO of Alon Israel. Back in the Middle East, Alon started when Israel broke its state monopoly on petroleum retail in the early 1990s. After a quick shakeout, Alon Israel emerged as one of the surviving retailers and today has roughly 20 percent of the market. In addition to the 355 stores run by Alon Israel, the company is made up of three other entities: Bielsol Investment, a $890-million-a-year group of companies involved in land development for commercial centers and petroleum retail; Africa Israel, a $440-million-a-year real estate and construction firm; and the Kibbutz movement, a large energy consumer that combines 300 economic cooperatives involved in agriculture, industry, tourism and commerce.
State law would not allow further c-store and petroleum retail growth for the company in Israel, so Wiessman says the company leaders started looking for other markets to branch into. Their research lead them through possible growth opportunities in Europe, but eventually, they discovered their best options in the U.S. The reason the U.S. was so appealing had to do with Alon’s strategic philosophy. One of the company’s stipulations was to purchase what Wiessman calls an “integrated system.” He says, “We did not want to be only in c-stores or only in refining.”
With the intentions being to acquire a refiner-marketer, Wiessman and his team approached Total Fina Elf even before the European oil company put its U.S. assets on the block. Eventually, the sale seemed to be a win-win for all parties, with Elf interested in divesting the assets to focus on chemical production and Alon wanting to implement its growth strategy. The move was also received well in the Unites States, with Fina employees realizing that Alon would need their knowledge of the market to move forward.
The alternative scenarios could have been worse. Purchase of the Fina assets by a domestic company may have meant consolidation or the breakup of the company into smaller pieces.
The company looks to the future with a philosophy of “physical integration,” according to Jeff Morris, president and CEO of Alon USA. Essentially the focus is to use refining and marketing assets to help drive down costs, allowing Fina-branded c-stores and distributors to compete effectively with discount chains and mass-merchant retailers.
To execute their physical integration strategy, Alon is growing its refining capacity and expanding its network of pipelines and terminals. Presently, the company owns and operates the Amdel Pipeline, Trust/River Pipeline and Fin-Tex Pipeline, and it leases portions of the Holly Pipeline system. Plans are in the works to bring an additional pipeline, one running from Abilene to Dallas-Fort Worth, this year. The company also has terminals in Abilene, Big Spring, Dallas, Orla and Wichita Falls, Texas; as well as one in Duncan, Okla.
The SCS stores are located in Wichita Falls, Big Spring, Lubbock, Midland, Odessa and El Paso, as well as Albuquerque, N.M. SCS is the largest 7-Eleven franchisee in North America, say Alon officials, adding that they are actively pursuing new building and acquisition opportunities.
While the company still handles exchanges in some of its more remote marketing areas, a majority of its outlets receive supply from Alon-owned facilities.
For the near future, Wiessman definitely sees growth for Alon in the U.S. He envisions what he calls “organic growth,” where there will be natural extensions involving pipelines and other assets. But he also envisions significant acquisitions involving not just retail locations, but also pipelines and refineries outside of current markets. “The key is to do the right acquisition at the right time,” Wiessman says. “We purchased our refinery at a time when people wanted to get rid of refineries. So timing is important.”
