Behind Couche-Tard's CST Brands Deal
By Greg Lindenberg and Steve Holtz on Sep. 19, 2016SAN ANTONIO – Alimentation Couche-Tard Inc. approached CST Brands Inc. with the idea of acquiring the Texas-based convenience-store chain even before CST investors prompted the strategic review that led to the deal, according to documents CST filed with the U.S. Securities and Exchange commission.
The documents also reveal that CST met with several other c-store companies and private-equity firms about possible mergers or acquisitions.
Click through for a timeline of the deal …
October 2015
On Oct. 20, 2015, Brian Hannasch, president and CEO of Laval, Quebec-based Couche-Tard, met with Kim Lubel, president, CEO and chairman of CST Brands, San Antonio. Hannasch mentioned potential interest in a combination of CST and Couche-Tard, but did not propose a price or any terms and did not make a proposal or offer.
On Oct. 30, Couche-Tard submitted a tentative proposal setting a price of $43.50 to $45.35 per share in cash.
November 2015
The CST board on Nov. 11 concluded it is not in the best interests of CST to pursue the proposed transaction.
December 2015
On Dec. 12, Couche-Tard increased its offer to $46.80 per share.
On Dec. 17, CST rejected Couche-Tard’s second offer.
On Dec. 22, CST agreed it was willing to discuss a potential sale of particular CST assets, including stores in the western United States and businesses in Canada.
January 2016
In early January 2016, Couche-Tard submitted a new proposal for all of CST’s outstanding common stock at $48.50 per share and said that Couche-Tard was prepared to make the offer public. CST rejected the offer.
In January and February, CST considered and suggested multiple merger opportunities for growing its retail business. None was enacted.
In late January, CST entered into a confidentiality agreement with Couche-Tard to work out a possible sale of CST Brands.
February 2016
On Feb. 8, Couche-Tard revised its proposal to $49 per share. Hannasch indicated that if the offer was not accepted, Couche-Tard would make public a proposal to acquire CST at a lower price.
On Feb. 12, Lubel spoke with representatives of a private-equity firm to discuss a possible acquisition. No offer was made.
On Feb. 18, a second possible investor was contacted. The board also told Couche-Tard it was open to a higher price. Couche-Tard did not increase its price at this time.
In late February, CST stockholders JCP Investment Management and Engine Capital LP publicly announced they intended to nominate a slate of directors at CST’s 2016 annual meeting of stockholders. This was the first public sign that CST Brands’ days may be numbered.
March 2016
In early March, the CST board decided to indicate to Couche-Tard its willingness to work toward an agreeable price. The board added that if Couche-Tard was not prepared to proceed on that basis, it would publicly announce a formal process to explore strategic alternatives. The board formed a Strategic Review Committee.
On March 3, Hannasch indicated that Couche-Tard was not prepared to increase its most recent offer. CST issued a press release announcing that it would start a formal process to explore strategic alternatives to further enhance stockholder value.
The Strategic Review Committee said CST would consider entering into exclusive negotiations with Couche-Tard if Couche-Tard were willing to substantially increase its proposed price.
On March 9, Hannasch said Couche-Tard was not prepared to increase its most recent offer.
On March 14, Couche-Tard reiterated its previous proposal. The committee rejected the proposal.
April 2016
CST’s public announcement drew inquiries from 92 total parties, including 35 potential strategic acquirers, 52 financial sponsors and five real-estate investment trusts (REITs); 27 potential counterparties negotiated confidentiality agreements and received an initial confidential information package containing CST’s business and financial information.
May 2016
In mid-May, CST received nine first-round bids from participants in the strategic review process, including a $43.50 proposal from Couche-Tard. Other offers cited in the SEC document ranged from $39 to $55 per share.
Couche-Tard revised its indicative price to an indicative range of $45 to $49. CST offered management presentations to seven bidders, including Couche-Tard.
June 2016
In June, following management presentations by CST senior management, CST received four second-round proposals in all. Couche-Tard’s proposal to acquire CST was unchanged, with a per-share indicative range of $45 to $49. Other offers ranged from $45 to $55.
August 2016
On Aug. 8, CST received an offer from Couche-Tard to acquire CST Brands for $48 per share. The Couche-Tard proposal discussed how it would finance the transaction and how it would address potential Canadian competition issues. Other potential buyers also submitted follow-up bids, including two higher than Couche-Tard’s offer; however, they did not include financing details and other requested information.
On Aug. 9, Couche-Tard indicated it was making significant progress in reaching agreement with a potential buyer of certain Canadian assets of CST to facilitate competition clearance of the transaction in Canada. The Strategic Review Committee asked for improved offers from four of the bidders, including Couche-Tard. None of the bidders increased its proposal.
On Aug. 12, the board authorized CST to engage with Couche-Tard to seek to improve the financial terms of its offer, as well as the level of the commitment Couche-Tard would undertake to obtain regulatory approval.
In the course of negotiations, Couche-Tard agreed to increase the consideration per share of CST common stock from $48 to $48.53, agreed to a strong commitment to obtain regulatory approvals of the transaction (including both the regulatory provision in the merger agreement requested by CST and a plan to announce simultaneously with the merger agreement a separate agreement with a third party to sell certain Canadian assets of CST after the merger) and agreed that Couche-Tard’s parent company would unconditionally guarantee the obligations of Circle K under the merger agreement.
On Aug. 21, Couche-Tard’s board unanimously approved the merger agreement and the unconditional guaranty.
On Aug. 21, CST’s board unanimously determined that the merger was in the best interests of CST and its stockholders, declared it advisable to enter into the merger agreement and approved the execution, delivery and performance of the merger agreement and related transactions.
The parties entered into the merger agreement and the related guarantee of Couche-Tard on Aug. 21. On Aug. 22, CST and Couche-Tard each issued a press release announcing the execution of the merger agreement.