4 Couche-Tard Deals That Got Away

LAVAL, Quebec -- As revealed by co-founder Alain Bouchard in the new book “Daring to Succeed: How Alain Bouchard Built the Couche-Tard & Circle K Convenience Store Empire,” the story of Alimentation Couche-Tard Inc. is one of a series of successful acquisitions that turned a small Canadian depanneur retailer into a huge enterprise with 12,000 convenience stores worldwide.

Industry observers often dismissed Bouchard’s boldly stated expansion goals with great skepticism, but he almost always achieved those goals.

Almost.

Over the years, a few major deals have eluded this master acquirer. What did Bouchard learn from those deals that got away?

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In what will be one of Couche-Tard’s biggest deals, the company announced in August the agreement to acquire San Antonio-based CST Brands Inc. (The transaction has yet to close, and CST is holding a special stockholders meeting Nov. 16 to consider it.)

But in 1995, before the CST deal was even a twinkle in his eye, Bouchard tried to acquire Canadian refiner-marketer Ultramar’s gas stations. He sought out the assistance of Robert Dutil, owner of steel processing firm Canam Group; Andre Caille, president of hydro-electric energy company Hydro-Quebec; and Jean Gaulin, head of the Ultramar refinery, to help him with the acquisition. None of them was interested.

“I met with Ultramar in 1995,” Bouchard told CSP Daily News in an interview coinciding with the book’s publication. “I met with the CEO and I tried to convince him--because they were under pressure from other companies that bought some of their shares--and I thought that I could convince them to join me and make a play as a privatization of the company. They were not interested in doing that.”

In 1996, Ultramar purchased refiner-marketer Diamond Shamrock, and Valero Energy Corp. acquired Ultramar Diamond Shamrock in 2001. San Antonio-based Valero, which operated the Corner Store convenience-store brand, spun offUltramar with CST in May 2013.

Couche-Tard would get another opportunity in a different time and place.

After purchasing the Circle K convenience-store network from ConocoPhillips in 2003, Couche-Tard decided to unify its U.S brands under the Circle K name, much as it is doing now on a global scale. The strategy was to create a major national chain to rival 7-Eleven Inc.

“Hostilities with 7-Eleven were not far below the surface,” said Bouchard.

There were approximately 5,800 7-Eleven stores in the United States; with about 3,000 stores, Couche-Tard had only about half in the American market. However, Couche-Tard owned more than 80% of its convenience stores, while 7-Eleven owned only 40% of its c-stores, so 7-Eleven didn’t actually own many more American convenience stores than Couche-Tard did. And Couche-Tard had higher profits.

Couche-Tard was looking for another major acquisition and wanted to buy out one of its rivals to surpass 7-Eleven.

“I would have been interested in buying 7-Eleven,” Bouchard said.

He flew to Tokyo to meet with chairman Masatoshi Ito in the hopes that he would agree to sell the American portion of his global retail network. “We’re both growing, we’re not really competing much in North America, so maybe it would be good to just start a discussion and see if we can build something together,” he said. The answer was, “No, thank you. We are happy with what we have.”

“The Japanese aren’t sellers,” he said.

Couche-Tard would have to take on 7-Eleven some other way, said Bouchard.

Before CST existed, Bouchard made a move on Valero’s retail network.

“I tried for many years to buy out” what is now CST, he told CSP Daily News. In 2009, Bouchard and CEO Brian Hannasch met with Bill Klesse, then CEO of Valero. “We tried to convince him to sell their retail division to us. He said no, and a few years later, they decided to do the spinoff.”

Considering that the CST deal is about to be consummated, bundling the Ultramar brand and Valero retail assets into a neat package, perhaps the deal didn’t actually get away.

“It’s another long story about patience,” Bouchard said.

In March 2010, Couche-Tard attempted a hostile takeover of “model business” Casey’s General Stores Inc., Ankeny, Iowa, for nearly $2 billion. Well managed, well maintained, profitable and debt-free, it had more than 1,500 corporate stores in the Midwest.

Casey’s management rejected the offer for $36 a share and adopted a poison-pill strategy, sinking $500 million into debt to purchase one-quarter of its own shares at a price higher than what Couche-Tard was offering. It also took Couche-Tard to court, accusing it of having manipulated the markets to its advantage.

Twice Bouchard sweetened the offer, hoping it would meet with the shareholders’ approval.

In September 2010, 7-Eleven made a surprise offer of $40 per share. Casey’s management said the offer was attractive enough to enter into negotiations, which lasted up until the last offer from Couche-Tard expired. Casey’s rebuffed 7-Eleven’s advances, even when the offers became more generous.

“Casey’s is a very good operator,” Bouchard said. “They were very respectful about what they did. I think we helped them when we tried to acquire them. We helped them to realize how good they were.”

“For us, we thought it was a perfect fit for our Midwest network. It didn’t happen. We just turned the page. No hard feelings there,” he said.

Laval, Quebec-based Couche-Tard’s retail network includes more than 12,000 locations. In North America, it has approximately 7,900 convenience stores. It has 15 business units, including 11 in the United States covering 41 states and four in Canada covering all 10 provinces. In Europe, Couche-Tard operates a retail network across Scandinavia, Ireland, Poland, the Baltic states and Russia through 10 business units. Most of the approximately 2,700 stores sell fuel and c-store products; others are unmanned automated fueling sites.