Couche-Tard Flexes Acquisition Muscle '

Doubles Circle K presence on West Coast with ExxonMobil deal

Steve Holtz, Editor in Chief, CSP Daily News

LAVAL, Quebec -- If it has seemed that Canada's Alimentation Couche-Tard has been quiet on the acquisition front, it's not for lack of trying, or even lack of achieving. The company announced a small deluge of purchases yesterday that could add up to 378 convenience stores, as well as growth as a gasoline supplier.

As reported first in a Morgan Keegan/CSP Daily News Flash yesterday, Couche-Tard signed a deal with Exxon Mobil Corp. for up to 322 sites plus right to supply an additional 65 Mobil-branded locations in Southern California. The company also announced [image-nocss] acquisitions in the Mid-Atlantic United States, Canada and the Midwest. (See related story in this issue of CSP Daily News.)

"We're working on several different files [at any given time]," vice president and CFO Raymond Pare said yesterday. "Some are smaller, some are a little bit more interesting in size, but all acquisitions are interesting. An acquisition of 20 stores is just as interesting as an acquisition of [300 stores] if it's good assets and a good complement to our network."

In the ExxonMobil deal, Couche-Tard signed, through its wholly owned indirect subsidiary Circle K Stores Inc., an agreement to acquire up to 322 sites plus an additional 65 reseller contracts in Southern California. The transaction is anticipated to close in stages between the fourth quarter of the 2011 calendar year and the second quarter of 2012.

Of these 322 sites, 72 are company-operated and 250 are dealer-operated. Circle K would own the real estate for up to 202 of the total number of sites. In compliance with California law, ExxonMobil will be presenting a "bona fide" offer to the 165 fee property dealers, essentially giving them first right of refusal to purchase the sites themselves, if so interested. Should any of those properties be purchased by the dealer, the branded supply agreement would still be assigned to Circle K. The balance of the sites would be leased.

"Even if [the dealers] buy the property, we're still buying the supply agreement. That won't change," Pare said. "Our goal is not the real estate; it's the operation. For us, it's still a good deal."

The purchase was part of a bid packaged developed by ExxonMobil in its ongoing process of selling off its retail sites. "They were selling all of their [retail] assets as they announced, and they're just proceeding region by region," Pare said, "and that's the normal process that can sometimes take a little more time." The next large region ExxonMobil is expected to sell off is Texas.

Pare said the California sale process, which included multiple bidders, had been ongoing for almost a year. It became clear Couche-Tard would be the winning bidder in just the past couple of months.

All of the stores are currently selling fuel under the Mobil brand. The transaction includes the assignment of the supply and branding contracts for Mobil-branded motor fuel for 65 reseller locations.

All of the 387 locations would continue to offer Mobil-branded motor fuel allowing customers to continue using the ExxonMobil credit card. The company-operated sites would be operated under the Circle K brand and the entire network would be part of Couche-Tard's West Coast Division network. The dealer-operated locations would continue to be operated by current dealers.

"Subsequent to this transaction, our network in the Circle K West Coast Division would include a total of 228 company-operated, and 315 dealer or reseller-operated," Tim Tourek, vice president of operations for the West Coast Division said in a press release. "These stores are high volume, high impact locations. They would significantly strengthen our overall footprint in this important market."

He added, "Under our Worldwide Franchise Division, we already have an additional 315 Circle K-branded sites on the West Coast. We are extremely excited about the addition of these stores, employees and dealers to our family."

The transaction is subject to regulatory approvals and closing conditions. The purchase price was not disclosed. Couche-Tard will use available cash and bank facilities to fund the transaction.

Laval, Quebec-based Alimentation Couche-Tard Inc.'s network is comprised of 5,874 convenience stores, 4,169 of which include motor fuel dispensing, operated by 13 business units, including nine in the United States covering 42 states and the District of Columbia, and four in Canada covering all 10 provinces.

Steve Holtz, CSP/Winsight By Steve Holtz, Editor in Chief, CSP Daily News
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