HOUSTON -- Pop quiz: Who is Shell Oil Products US's biggest wholesale customer? Assuming a deal announced yesterday to purchase 236 stores goes through, it will be Alimentation Couche-Tard Inc., cementing a relationship that began earlier this year, when the Canadian company purchased 40 stores and assumed an additional 13 fuel supply contracts in the Indianapolis from Shell.
The difference in the deals, however, was the method of sale. They were [the highest] bidder on Indianapolisand they subsequently got those stores, Stu Crum, general manager, [image-nocss] strategy and portfolio for Houston-based Shell, told CSP Daily News. In yesterday's deal, however, It was an unsolicited offer. And it was attractive enoughthat we felt it by far created the best value for the company than what we'd get by going out to bid.
As reported in a CSP Daily News Flash yesterday, Laval, Quebec-based Couche-Tard announced its acquisition of the 236 sites from Shell Oil Products US and its affiliate Motiva Enterprises LLC.
The 236 sites currently operate under the Shell banner and are located in Baton Rouge (22), Denver (71), the greater Memphis area (16), Orlando (28), Southwest Florida (46) and Tampa (53). Of the 236 sites acquired, 175 are company-operated, 49 are operated by dealers and 12 have a motor fuel-supply agreement. In the case of the 49 dealers, Couche-Tard will continue to own 25 or lease 24 of the sites and will supply motor fuel to them. As for the 12 supply-agreement-only sites, Couche-Tard will have no control over the real estate but will continue to supply motor fuel. Also, 174 of the sites were part of Shell's multi-site operator (MSO) program, according to spokesperson Anne Peebles.
The company-operated sites will be reimaged to Circle K and will continue to sell Shell motor fuel pursuant to supply agreements signed with Shell and Motiva.
Strategically, these acquisitions would be excellent additions to our current network, while entering into a new market (Denver) and would efficiently complement the network expansion plans, Brian Hannasch, senior vice president of Western North America, Circle K, said in a press release. Consistent with our development strategy, we selected these sites based on the following criteria: prime locations, potential for growth, quality of people and the opportunity to expand our relationship with Shell Oil US.
Furthering that relationship, yesterday's agreement, expected to close by the end of the year, also provides for the conversion of approximately 250 existing Circle K sites to the Shell brand in these same and other U.S. markets. Under these arrangements, the convenience stores will remain Circle K branded while the fuels offering will become Shell branded.
While Crum said Shell is not giving Couche-Tard favorable treatment as it sells off stores in several markets across the countryup next: Atlanta, Philly/South Jersey and Connecticuthe makes no bones about the fact a partnership is forming between the two companies. Unapologetically, we're looking for a strong c-store partner, and we're testing a lot of different ideas, he said. And we believe that we've found a very good partner in Couche-Tard. They're going to be our biggest customer now.
Should the transaction close as expected, Couche-Tard evaluates that these assets would add approximately 340 million gallons in motor fuel volume sales and approximately $120 million in merchandise sales and contribute to its earnings on an annualized basis. According to a confidentiality agreement between the parties, the purchase price could not be disclosed. Internal available cash dollars will be used for the transaction along with the company's revolving term credit facilities.
Couche-Tard plans to invest an aggregate amount of approximately $45 million over the next five years, of which $25 million will be invested within the first 18 months to either raze and rebuild or renovate the stores at such sites in accordance with Circle K standards.
Couche-Tard is a leader in the Canadian c-store industry. In North America, it is the third-largest c-store operator and the second largest independent (not integrated with a petroleum company) c-store operator and the most profitable one within such category as a publicly held company. Couche-Tard's network is currently comprised of 5,205 c-stores, 3,244 of which include motor-fuel dispensing, located in eight large geographic markets, including three in Canada and five, which cover 23 states in the United States.
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