How a Georgia Tornado Affected Couche-Tard’s CST Deal
By Greg Lindenberg on Jun. 26, 2017WASHINGTON --Alimentation Couche-Tard Inc. has agreed to divest up to 71 retail fuel stations with convenience stores to Empire Petroleum Partners in order to settle Federal Trade Commission (FTC) charges that Couche-Tard’s proposed $4.4 billion acquisition of CST Brands Inc. would violate federal antitrust law, the agency said.
Couche-Tard and CST announced the $4.4 billion deal in August 2016. The closing of the transaction will occur on June 28, 2017, Couche-Tard and CST said yesterday.
Here are more details on the divestiture, including the stations and their locations, and the rationale behind the FTC's ruling. …
8 states
The FTC’s divestiture order requires Couche-Tard to divest 70 CST fuel stations to Empire, and to give Empire the option of acquiring an additional location owned by Couche-Tard.
Empire Petroleum, Dallas, distributes motor-fuel products to more than 1,400 locations in 27 states in the Mid-Atlantic, Southeast, Southwest and Midwest. Brands include Chevron, Shell, Valero, ConocoPhillips, Marathon, CITGO, Texaco, Sunoco, BP, Exxon, Mobil and Gulf.
The locations Couche-Tard will divest are in Arizona (25), Colorado (10), Florida (6), Georgia (3), Louisiana (2), New Mexico (5), Ohio (1) and Texas (19), in these metropolitan statistical areas: Phoenix, Sierra Vista and Tucson, Ariz.; Colorado Springs and Denver, Colo.; Jacksonville, Fla.; Albany, Savannah and Warner Robins, Ga.; Shreveport, La.; Albuquerque and Las Cruces, N.M.; Cleveland; and Austin, Corpus Christi and El Paso, Texas. (Click here for the full list of stores.)
Under the terms of the consent agreement, Couche-Tard has 75 days after the transaction closes or 14 days after the FTC’s consent agreement becomes final to divest to Empire CST’s stations.
Georgia tornado
In Albany, Ga., Couche-Tard’s retail fuel station was damaged by a tornado in early 2017 and the proposed divestiture agreement requires Couche-Tard to give Empire the option to buy this site. If Empire declines, the proposed divestiture agreement prohibits Couche-Tard, for a period of 10 years, from restricting the use of the property as a retail fuel station in any future sale.
Competition
According to the new FTC complaint, the geographic markets for the retail sale of gasoline and diesel are localized, generally ranging from a few blocks to a few miles. The complaint alleges that without a remedy, the merger would significantly increase market concentration for the retail sales of gasoline or diesel in each of the 71 local markets, resulting in a monopoly in 10 markets and reducing the number of competitors in the rest to two or three.
The complaint also alleges that without the divestiture, the merger would allow the combined entity to raise prices unilaterally in markets where CST is Couche-Tard’s only or closest competitor, and increase the likelihood of coordinated effects in markets where three or two competitors would remain.
To head off earlier antitrust issues, at the same time it announced the CST deal, Couche-Tard also entered into an agreement with Parkland Fuel Corp., Red Deer, Alberta, to sell certain CST Canadian assets after the merger for approximately $750 million. Those assets would include CST’s cardlock business (72 sites), CST’s dealer and commission agent business (490 sites), CST’s commercial and home energy business and a number of company-operated stores to be determined following the Competition Bureau of Canada’s review of the transaction.
Consent order
The FTC vote to issue the complaint and accept the proposed consent order for public comment was 2-0. The FTC will publish the consent-agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning June 26, 2017, and continuing through July 26, 2017, after which the FTC will decide whether to make the proposed consent order final.
CST Brands, San Antonio, has more than 2,000 locations throughout the southwestern United States, Georgia, Florida, New York and eastern Canada.
Laval, Quebec-based Couche-Tard's network includes 8,081 convenience stores throughout North America, including 6,710 stores selling motor fuel, mostly under the Circle K, Kangaroo Express, Mac's and Couche-Tard banners. Its North American network consists of 15 business units, including 11 in the United States covering 41 states and four in Canada covering all 10 provinces.