The Pantry to acquire 40 stores

Sanford, N.C. The Pantry said Tuesday that it will acquire 40 stores from Herndon Oil Corp. The chain also announced that it repurchased $26 million in principal amount of outstanding bonds during the second fiscal quarter.

The acquisition, which includes stores operating in Mobile, Ala., Florida, Mississippi and Louisiana, is expected to be funded with cash on hand. Pending regulatory approval, the transaction is expected to close in the second half of fiscal 2009.

“This acquisition fills a gap in our existing store base and represents our initial entry into the attractive Mobile market,” said Pantry chairman and CEO Peter J. Sodini. “We expect this transaction to be accretive to our earnings per share in the first 12 months after closing.”

The chain reported it operated 1,648 stores as of last Friday.

In other news, the chain said that during the second quarter it repurchased $26 million in principal amount of its outstanding bonds, consisting of $23 million of its 3.0% Senior Subordinated Convertible Notes and $3 million of its 7.75% Senior Subordinated Notes. Overall, the aggregate purchase price is approximately $19 million.

The transaction will include a pre-tax gain of over $6 million, which will extinguish debt in its financial results for the quarter. These earning will be reported in early May.

“The repurchase of outstanding bonds at a discount and the pending acquisition both represent high-return investments on behalf of our shareholders,” Sodini said. “They are key steps forward in executing our balanced strategy of reducing debt while growing the business.”