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Couche-Tard Could Leverage ExxonMobil

Major's selloff presents opportunity for acquirer from the North

LAVAL, Quebec -- Exxon Mobil Corp.'s announcement that it will sell its U.S. retail operations could spell an attractive acquisition opportunity for Alimentation Couche-Tard Inc., according to a report by The National Post. Couche-Tard's management is seeking larger acquisition targets in fiscal 2009, analyst Sara O'Brien of RBC Capital Markets said in a note to clients cited by the newspaper, reiterating her outperform rating and price target of $19 on the Quebec-based convenience chain's shares.

"[A] competitive bid process means Couche-Tard will not be alone in bidding for the assets," [image-nocss] she wrote. "So far, ExxonMobil and ConocoPhillips have selected to parcel off packages of c-stores by region...we see Couche-Tard as holding a bargaining chip in offering to convert some of its Circle K branded gas to [the] seller's brand. In addition, Couche-Tard's reputation as solid operators delivering gas volume growth...will likely be considered in the bids."

In early May, Couche-Tard forged a deal with Saint John, New Brunswick-based Irving Oil to operate nearly 300 of Irving's Mainway and Bluecanoe convenience stores. The stores will be rebranded to one of Couche-Tard's retail identities, while the pumps will still offer Irving fuels. (Click here to view CSP Daily News coverage. Also,click here to read an interview with Couche-Tard CEO Alain Bouchard.)

O'Brien said she expects renewed investor interest in the retailer from potential deals, the report said; she added that the company's shares have been driven down due to lower gasoline margins and softer volume and could be a good defensive buy.

Irving, Texas-based ExxonMobil's ExxonMobil Fuels Marketing Co., Fairfax, Va., announced its intention last week to transition out of the direct-served (dealer- and company-operated) retail business in U.S. markets. This move will include the conversion of a majority of markets to branded distributor to build on the strength of its current distributor network. This transition will occur over a multi-year period, the company added. (Click here to view previous CSP Daily News coverage.)

Calgary, Alberta-based Imperial Oil Ltd., meanwhile, said that it has no plans to sell off the 700 Esso-branded gasoline stations it owns in Canada. Imperial is 69.6% owned by ExxonMobil. (Click here to view CSP Daily News coverage.)

Laval, Quebec-based Alimentation Couche-Tard currently operates a network of 5,690 c-stores, 3,440 of which include motor fuel dispensing, located in 11 large geographic markets, including eight in the United States covering 29 States and three in Canada covering six provinces.

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