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The Pantry looking at Cary for HQ

CARY - A public company soon could relocate its corporate headquarters to the Triangle, though The Pantry Inc.'s move from Sanford wouldn't be a long one.
/ Source: Triangle Business Journal

CARY - A public company soon could relocate its corporate headquarters to the Triangle, though The Pantry Inc.'s move from Sanford wouldn't be a long one.

Pantry executives have been looking at Triangle office buildings in search of 30,000 square feet of space - enough to accommodate about 85 headquarters employees. Real estate sources say the company is close to signing a lease at the 2000 Regency Parkway building in Cary.

Calls to Pantry Chief Executive Officer Peter Sodini and Chief Financial Officer Dan Kelly were not returned.

The Cary office building is only 30 miles from The Pantry's corporate headquarters in Sanford, and many of The Pantry's executives and corporate staff commute to Sanford from homes in Wake County neighborhoods. Sodini owns a home near Falls Lake in north Raleigh.

The Pantry is one of the largest convenience store operators in the country, and the company has aggressively been expanding its footprint across the Southeast over the past few years.

In the past nine months alone, The Pantry has acquired 107 stores. Add in 96 stores purchased during fiscal 2005, and the company now boasts 1,458 stores in 11 states operating under various brands, including Kangaroo and Lil' Champ. The company has more than 9,000 employees spread across those stores.

Analysts predict more acquisitions are on the horizon for The Pantry.

"It's a roll-out story," says Tim Allen, an analyst with Jefferies & Co. "They find smaller, less-efficient convenience store companies with maybe 25 to 50 stores or less, and they instantly get a boost in operating margins by putting them on their beverage and food supply contracts and gasoline contracts."

Allen estimates there are roughly 42,000 convenience stores in the Southeast with 110 separate companies that operate 25 stores or more.

"There are still several years of acquisition potential," he says, pointing out that The Pantry has acquired almost 30 different companies since 1999. Neither Allen nor his family own stock in The Pantry. Jefferies & Co. has had a corporate finance relationship with The Pantry in the past.

Once an acquisition is complete, it takes about a month to absorb a company into The Pantry's operations. "They've got it down to a science," Allen says.

It wasn't always a science for The Pantry.

Founded in 1967 by North Carolina businessmen Sam Wornom and Truby Proctor, now president of Lee-Moore Oil Co. in Sanford, The Pantry had grown to 480 outlets by 1987. At that time, investment firms began buying ownership stakes in the company, and by the early 1990s the company was struggling for profit.

In 1996, Sodini, a former CEO of a supermarket chain, was hired as The Pantry's chief executive. By 1998, The Pantry was in aggressive acquisition mode and went public in 1999 to raise the money needed to pay off nearly $450 million in debt stemming from its acquisitions.

In July 2005, the company suffered a setback when it had to default on certain loan agreements and restate its profits dating back to 1999 due to a change in how it calculated its property holdings.

Still, the company recorded sales of $4.4 billion in fiscal 2005. In April, it reported net income for the second fiscal quarter of $9.2 million, compared to $3.3 million during the same quarter a year earlier.

The company doesn't just grow through acquisitions. The Pantry's management plans to open seven new stores in 2006, 12 to 15 in 2007 and 20 to 25 in 2008. Most of the new stores are a larger format averaging 4,000 to 5,000 square feet.