Company News

Couche-Tard's Next Circle K

Retail giant eyeing another big purchase, other acquisitions

LAVAL, Quebec -- Alimentation Couche-Tard Inc. is in talks with four convenience store chains over potential small- and medium-sized acquisitions, and is on the lookout for another major purchase involving up to 2,000 stores, said CEO Alain Bouchard, according to a report in The Globe & Mail.

The operator of 4,845 North American c-stores has made four offers on clusters of fewer than 100 outlets and may have something to announce over the coming months, Bouchard said on a conference call Tuesday. He also said Couche-Tard has the resources to close [image-nocss] a $1 billion to $1.5 billion deal similar to the $1.1 billion purchase in late 2003 of 2,290 Circle K stores in 16 U.S. states.

We have a lot of room to manoeuvre, Bouchard said. There are no talks for the moment on a larger acquisition, but Couche-Tard is ready to move if the right target becomes available, he added. We know there will be opportunities in the future, but we never know when.

He made the comments after Couche-Tard, the fourth-largest c-store operator in North America, posted fourth-quarter profit of $40 million or 19 cents a share on sales of $2.4 billion, compared with $20 million or 10 cents on sales of $2.3 billion, in the previous year's period. For the year, the company reported profit of $199.5 million or 97 cents a share, compared with $75.5 million or 42 cents last year. As reported in CSP Daily News yesterday, the jump reflected the full integration of the Circle K operations last year and strong U.S. gasoline gross margins.

Another big acquisition would put Couche-Tard within striking distance or even ahead of North American industry leader 7-Eleven Inc., which has about 5,800 stores across the United States and Canada, and close to 28,000 locations worldwide, the newspaper speculated.

The U.S. c-store sector is viewed by many observers as ripe for consolidation, and Couche-Tard is now well positioned as a major player there, the report said.

Bouchard has pointed out in the past that the United States remains a highly fragmented market, with no individual player operating more than 10 per cent of the estimated 138,200 outlets.

Jessy Hayem, an analyst at Desjardins Securities, said in a note to clients, We expect the company to continue pursuing small tuck-in' acquisitions and believe that it is well positioned to take on a larger-scale acquisition, should an opportunity arise.

Adding to Couche-Tard's expansion plans is a possible equity investment with one or more of its 4,000 Circle K licensees in Asia. It looks good, Bouchard said about the potential of the booming Asian market, said the report.

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