TORONTO -- A second analyst is speculating that Alimentation Couche-Tard Inc. may be on the verge of scooping up the retail assets of Hess Corp. Earlier this week, Michael Van Aelst, managing director of research for TD Securities Inc., Montreal, was the first to suggest that such an acquisition would be a "logical" move for the Canadian retailer. Now David Hartley, research analyst for Credit Suisse Securities Canada Inc., Toronto, echoed that opinion and added that CST Brands Inc. could also be mulling a move on Hess.
"We believe that Couche-Tard could be an interested buyer of some, or all of Hess' retail locations," he wrote in a research note entitled "Couche-Tard, CST: Say Yess to Hess."
"We estimate that a price tag in the $3.4 billion range would be reasonable," he said. "The price implies an estimated 0.25x sales and an estimated 8.5x EBITDA. Assuming synergies of 0.5% of sales, or $68 million, the price tag drops to 7.3x. We believe this is at the high end of recent transaction prices for Couche-Tard."
Hartley admitted that San Antonio-based CST Brands--the recent Valero Energy Corp. retail spinoff--is "a less-likely buyer."
He said, "CST believes it is limited in the number of stores it can acquire in any given year. CST could look at buying some of Hess' stores in the south, but synergies could be limited as CST's markets have no overlap with those of Hess. ... A 50-store acquisition from Hess could cost [approximately] $120 million."
Most (45%) respondents to a CSP Daily News poll this week that asked "Will Alimentation Couche-Tard Inc. acquire the Hess retail network?" said yes, it will acquire all of it; 28% said no, it will not acquire any of it, and 27% said yes, it will acquire most or some of it.
Woodbridge, N.J.-based Hess is a leading global independent energy company primarily engaged in the exploration and production of crude oil and natural gas and the marketing of refined petroleum products, natural gas and electricity. Hess is a major independent gasoline-convenience store retailers on the East Coast with more than 1,350 retail outlets in 16 East Coast states.
CST Brands is one of the largest independent retailers of motor fuels and convenience merchandise in North America. It operates nearly 1,900 locations throughout the southwestern United States and eastern Canada offering a variety of convenience merchandise, beverages, snacks and fresh food. In the United States, CST Corner Stores sell Valero fuels and signature products such as Fresh Choices baked and packaged goods, U Force energy and sport drinks, Cibolo Mountain coffee, FC Soda and Flavors2Go fountain drinks. In Canada, CST is the exclusive provider of Ultramar fuels and its Depanneur du Coin and Corner Stores sell signature Transit Cafe coffee and pastries.
Laval, Quebec-based Couche-Tard's network currently includes approximately 6,200 c-stores throughout North America, including approximately 4,500 stores with fuel. It has agreements for the supply of motor fuel to more than 350 sites operated by independent operators. Its North-American network consists of 13 business units, including nine in the United States covering 40 states and the District of Columbia (under the Circle K banner) and four in Canada covering all 10 provinces (under the Couche-Tard and Mac's banners).
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