Service Type: Valuation
Client: Cinco J, Inc. dba Johnson Oil Company
Client Description: A family owned company, Johnson Oil Company is the primary operating entity for Cinco J, Inc.’s multiple business lines, which are managed under its affiliate entities: Tiger Tote Food Stores, Inc.—retail c-store operator; Tres Mas, LLC—fuel supply wholesaler; Cinco J Investments, Inc. and Cinco J—principally real estate holding companies.
- The Company’s owner passed away, leaving the Company to his spouse and children. The surviving family were not interested in an active management role and sought to explore options to liquidate their interest in the Company.
- The Company engaged Corner Capital Advisors to determine an estimated Fair Market Value for its enterprise.
- The Company’s structure presented its owners with a number of ways to value their enterprise, each resulting in differing valuation estimates.
- Corner Capital Advisors explored all possible options for valuing the Company, and presented the Company with three valuation scenarios:
- Scenario 1 - This valuation method assumed the Company and its affiliates are sold in a single transaction to one buyer, contributing all assets and business lines in a consolidated sale.
- Scenario 2 - This valuation method differentiated the Company and its affiliates by individual business segments, valuing them independently of each other. The business segments were categorized into: convenience retail, dealer wholesale, commercial fuels and lubricants, and transportation.
- Scenario 3 - This valuation method was similar in its approach to independently valuing the Company’s business segments, with the exception that the Company was assumed to retain its real estate holdings through the implementation of long-term leases with a Tenant-Operator.
- The different valuation estimates provided the Company with multiple options depending on their strategic objectives. Scenario 1 provided the lowest valuation, but offered simplicity in return. Scenario 2 provided a significantly higher valuation, but implied a much more complicated sale process. Scenario 3 yielded the highest valuation, but did not meet the owners’ objective of exiting their participation in operating activities.
- Upon review of Corner Capital Advisor’s valuation scenarios, the Company concluded that its best interests were reflected in Scenario 2, which presented value to the owners in the form of complete liquidation and a higher sale price than Scenario 1.