LAVAL, Quebec -- In an unexpected turn, at least one stock analyst is suggesting Alimentation Couche-Tard Inc.'s effort to purchase Statoil Fuel & Retail in Norway has a 40% chance of falling through, potentially handing the North American retailing giant the second unsuccessful major acquisition effort in two years' time, following the failure to acquire Casey's.
"Considering only two-thirds acceptance [of the stock buyout] and Couche-Tard's renowned discipline in pricing acquisitions, the deal risk has definitely increased in our view," wrote analyst Michael VanAelst of TD Securities, Montreal, in research note yesterday; however, he said, "Our target assumes that the proposed ... acquisition is successfully completed."
Couche-Tard Inc. said in a statement that it is "disappointed" by shareholder response to the $2.68 billion bid.
Approximately 67% of the shares have been tendered, including the 54% held by Statoil ASA. Couche-Tard requires acceptance by 90% of Statoil Fuel & Retail's shareholders.
"We are disappointed with the preliminary results considering that we waived the offer condition relating to approvals and consents from governmental authorities," said Alain Bouchard, president and CEO of Couche-Tard. "Three independent firms have confirmed that our offer reflects the true and full value of Statoil Fuel & Retail. Statoil Fuel & Retail's board has recommended the offer to its shareholders. Since we announced our offer, no third party has demonstrated any interest to acquire Statoil Fuel & Retail."
Couche-Tard announced that its voluntary offer to acquire all of the issued and outstanding shares of Statoil Fuel & Retail has been extended until May 29, 2012. The extension, it said, will provide additional time for all shareholders to tender their shares following Couche-Tard's announcement on May 18, 2012, that it has waived the offer condition relating to approvals and consents from governmental authorities. All other terms and conditions of the offer remain unchanged.
Bouchard said he is confident that the company will succeed. "We remain firmly convinced that our offer provides full and fair value for Statoil Fuel & Retail and believe that its shareholders will ultimately recognize it by tendering their shares prior to the May 29 deadline."
The company's offer "provides Statoil Fuel & Retail shareholders with an attractive, fully financed proposal in an environment characterized by severe market turbulence and uncertainty," it said.
"We see 60% chance that a deal is completed (possibly with the help of a modest bump in the offer price) and a 40% chance that Couche-Tard walks away to focus on other opportunities," VanAelst said, "Couche-Tard has other irons in the fire and, therefore, will need/want to make a decision on [Statoil Fuel & Retail] as soon as possible. We should have a much clearer sense as to which direction the company will take by the second acceptance deadline set for May 29."
Martin Stenshall, an analyst at Danske Bank in Norway, told The Financial Post that there are three possibilities at this point, with two probable outcomes and one long shot: "Either Couche-Tard gets satisfied with a two-thirds stake in the short term and walks away, or they raise the bid because management wants a full acquisition. The third alternative is walking away completely, but that is less likely because their stock has increased 20% and if they do walk there's a great risk of it falling back to levels from before the bid."
If Couche-Tard does hike its bid the cost of acquisition goes up, but Stenshall said he does not expect the company to have to go much higher, in part because of a lack of rival bids.
If Couche-Tard does not raise its bid and settles for a majority stake, the company needs to wait only six months before it can begin acquiring shares again on the open market. At that point, Couche-Tard could benefit if Statoil stock falls on an inability to close the deal. Owning only 67% of Statoil means the deal will not be as accretive to Couche-Tard. If Couche-Tard ends up with only a majority stake, then its share value may be reduced by an amount equivalent to whatever minority stake remains. Actually acquiring the remaining positions over an extended period may become a much more irritating prospect than paying a little extra to buy the company outright now, Stenshall said.
Martin Landry of GMP Securities wrote in a research note cited by The Montreal Gazette that he believes shareholder support will grow. "In our view, Couche-Tard's offer is compelling and should gather greater shareholder support in coming weeks given the lack of competing offers, the support from [Statoil Fuel & Retail's] parent company, the turbulence in the European stock markets. ... In addition, Couche-Tard management has had an excellent track record of creating shareholder value through acquisitions, which should reassure investors."
In what ended up as one of the biggest industry news stories of all time, Couche-Tard spent a significant portion of 2010 trying to acquire Ankeny, Iowa-based Casey's General Stores Inc. Shareholders of the large Midwest chain of nearly 1,700 c-stores rejected the hostile takeover attempt even after Couche-Tard raised its bid, in a saga that at one point had Dallas-based 7-Eleven Inc. emerge as another bidder. Casey's leaders believed that Couche-Tard's offer undervalued the company.
(Click here for previous CSP Daily News coverage of the Statoil deal. And click here for previous coverage of the attempted acquisition of Casey's.)
As of Jan. 29, 2012, Laval, Quebec-based Alimentation Couche-Tard Inc. had a network of 5,817 convenience stores, 4,225 of which include motor fuel dispensing. It supplies motor fuel to 338 sites operated by independent operators. Couche-Tard's network consists of 13 business units, including nine in the United States covering 42 states and the District of Columbia (primarily under the Circle K flag), and four in Canada covering all 10 provinces (primarily under the Mac's and Couche-Tard flags).
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