Couche-Tard reportedly in talks to buy rival firm
Quebec-based Alimentation Couche-Tard says it is in talks about potential acquisitions, but would not confirm a published report that it could be on the cusp of reaching a deal to purchase rival CST Brands.
The Wall Street Journal reports the deal — which would bolster Couche-Tard’s position as one of North America’s largest convenience store chains — could be announced as early as this week and would be worth at least US$3.4 billion, the market value of the Texasbased company.
The paper cites sources familiar with the matter.
However, WSJ warns other bidders — rumoured to include 7-Eleven, Marathon Petroleum, OXXO or a private-equity firm — could ultimately prevail.
Couche-Tard, which operates the Circle K brand, has about 7,900 locations in North America, behind leader 7-Eleven. CST Brands has more than 2,000 locations in the U.S. and Canada.
In a news release issued at the request of the Toronto Stock Exchange, the company confirmed that it is in discussions with unnamed third parties about possible business transactions.
“No formal agreements have been reached. There is no assurance that transactions will result from any of these discussions,” it said in a news release.
“Couche-Tard reiterates that it will maintain its disciplined approach to acquisition opportunities to create value for its shareholders.”
Chief executive Brian Hannasch said earlier this year recent acquisitions, including the Esso retail network, don’t prevent the company from pursuing other acquisition targets such as CST Brands — which in March said it was conducting a strategic review that could include selling its network.
Analyst Irene Nattel of RBC Capital Markets expects the transaction would face Competition Bureau challenges, especially in Quebec, where Couche-Tard has about 800 stores and CST has 533 locations.
In Ontario, it has some 1,000 stores while CST has 146 locations.
“Nonetheless, an analysis of the potential combination of CST’s footprint in Canada and U.S. and that of Couche-Tard remains intriguing,” she wrote in a report.
Nattel said the deal could provide cost savings, including better inside-store supply terms, more efficient gas margin/volume management, reduced corporate overhead and increased market presence.
However, Nattel said that existing long-term fuel supply agreements with Valero/Ultramar would appear to offset cost savings from a renegotiated fuel supply agreement.