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Mergers & Acquisitions

Couche-Tard, CrossAmerica Close on First in Series of C-Store Swaps

Transfer includes 60 company-operated locations

LAVAL, Quebec, and ALLENTOWN, Pa. Alimentation Couche-Tard Inc., through its wholly owned subsidiary Circle K Stores Inc., and CrossAmerica Partners LP have announced an exchange of company-operated convenience stores and gas stations that is the first in a series of transactions under a December 2018 asset exchange agreement.

In December 2018, Couche-Tard announced that it agreed to transfer to CrossAmerica 192 U.S. company-operated convenience and fuel retail stores (162 fee and 30 leased stores), representing a total value of approximately $184.5 million, in exchange for assets having a total value of approximately $184.5 million.

These assets include the real property for 56 U.S. company-operated convenience and fuel retail stores currently leased and operated by Couche-Tard pursuant to a master lease that CrossAmerica previously purchased jointly with or from CST Brands Inc., and 17 company-operated convenience and fuel retail stores currently operated by CrossAmerica located in the U.S. upper Midwest. These are former Erickson Oil Freedom Valu sites in Minnesota, Michigan, Wisconsin and South Dakota, with a concentration in the Minneapolis-St. Paul region.

In this first transaction, Couche-Tard transferred to CrossAmerica 60 U.S. company-operated convenience and fuel retail stores (52 fee and 8 leased stores) having a total value of approximately $58.1 million. In exchange, CrossAmerica transferred to Couche-Tard assets having a total value of approximately $58.3 million. These CrossAmerica assets include all 17 of the Upper Midwest properties and the real property for eight master lease properties.

Prior to the exchange, Couche-Tard executed dealer agreements for the Circle K stores being transferred to CrossAmerica, including leases and fuel supply agreements, with independent dealers who will lease and operate the stores after the exchange. These agreements were assigned to CrossAmerica as part of the exchange.

In addition, Couche-Tard and CrossAmerica entered into a subjobber agreement in which Couche-Tard will supply fuel to CrossAmerica for resale to the dealers at those 60 stores after the exchange. The terms of the subjobber agreement were unanimously approved by the independent Conflicts Committee of the board of CrossAmerica’s general partner in December 2018 when the terms of the Asset Exchange Agreement were approved. The existing fuel supply arrangements for the eight master lease properties will remain unchanged.

Previous expectations were that the exchange of assets would occur in a series of transactions or “tranches” over a period of up to 24 months; however, it is now anticipated that the remaining exchange of assets will be completed in a series of transactions by no later than the end of the first quarter of calendar year 2020. The closing of each asset exchange transaction is subject to closing conditions set forth in the asset exchange agreement. The companies continue to expect that there will be no additional funding required as part of these transactions. CrossAmerica also expects these transactions will be accretive to distributable cash flow.

“We are very pleased with the process we have established to make this a smooth and fast transition,” said Gerardo Valencia, president and CEO of CrossAmerica. “We have identified very strong operators to maximize the potential of the sites we are taking over from Circle K and have a strong pipeline for the remaining 132 sites.”

Laval, Quebec-based Couche-Tard, owner of the Circle K c-store brand, has more than 9,900 convenience stores in North America in 48 states and Canada. It is No. 2 in the Top 40 update to CSP’s2018 Top 202 ranking of U.S. c-store chains by number of retail outlets.

Couche-Tard also has more than 2,700 locations in Scandinavia, Ireland, Poland, the Baltics and Russia. And licensees operate more than 2,100 stores under the Circle K banner in 14 other countries and territories. Its total network comprises more than 16,000 stores worldwide.

Allentown, Pa.-based CrossAmerica Partners is a major wholesale distributor of motor fuels and owner and lessor of real estate used in the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of Couche-Tard. Formed in 2012, CrossAmerica is a distributor of branded and unbranded petroleum for motor vehicles in the United States and distributes fuel to more than 1,200 locations and owns or leases approximately 900 sites. With a geographic footprint covering 31 states, it has relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, CITGO, Marathon and Phillips 66.

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