Mergers & Acquisitions

Couche-Tard to Divest 1,250 Stores to Acquire Speedway: Report

Sale would allay antitrust concerns over potential mega-deal
Photograph courtesy of Alimentation Couche-Tard

LAVAL, Quebec — Alimentation Couche-Tard Inc. has initiated a process to sell 1,250 convenience stores that are near Speedway gas stations to eliminate antitrust concerns over the possible acquisition of the Speedway chain, according to a report by The New York Post, citing sources close to the situation.

Laval, Quebec-based Couche-Tard expects to raise approximately $4 billion with the sale, which would be contingent on a deal to buy all of Enon, Ohio-based Speedway LLC’s 3,900 locations from parent company Marathon Petroleum Corp., Findlay, Ohio, said the report.

Couche-Tard declined to comment on the report.We do not discuss our [mergers and acquisitions] processes, whether we have such activities going on or not," the company told CSP Daily News.

  • Couche-Tard, with more than 5,900 U.S. c-stores, is No. 2 on CSP’s 2020 Top 202 ranking of U.S. convenience-store chains by total number of retail outlets. Speedway is No. 3.

Couche-Tard’s retail network consists of about 9,900 c-stores in North America, approximately 5,900 in the United States under the Circle K and Holiday Stationstores banners, and the rest in Canada under the Circle K and Couche-Tard banners. It also operates or licenses c-stores in 22 other countries or territories worldwide.

In March, Seven & i Holdings Co. Ltd., the Tokyo-based parent company of 7-Eleven Inc., Irving, Texas, dropped its bid to acquire Speedway for approximately $22 billion, citing the COVID-19 pandemic. 7-Eleven, with close to 9,400 stores, is No. 1 on CSP's Top 202 ranking.

Marathon Petroleum is moving ahead with a plan—announced in late 2019—to spin off Speedway into an independent, publicly traded company, although it has moved the target date for the separation from fourth-quarter 2020 to “early 2021” because of concerns over the pandemic, it said.

In January, Marathon Petroleum also began exploring a sale of Speedway rather than a spinoff, and attracted several other major buyers, including Blackburn, U.K.-based c-store retailer EG Group, which through EG America LLC, owns the Westborough, Mass.-based Cumberland Farms c-store chain. With nearly 1,700 stores, EG America is No. 5 on the Top 202 list.

A mid-June report in the Wall Street Journal suggested that the company has returned to the negotiating table, this time with Couche-Tard.

Couche-Tard is looking to head off objections from the Federal Trade Commission (FTC), which could be concerned that a combination of the two biggest retail gasoline and convenience-store chains could raise fuel and food prices at those locations, sources told the newspaper. Earlier this week, the company, along with its former affiliate, CrossAmerica Partners LP, agreed to pay a $3.5 million civil penalty to the FTC to settle allegations that it violated a 2018 order requiring it to divest 10 stations in Minnesota and Wisconsin to acquire Bloomington, Minn.-based Holiday Cos.’ approximately 380 stations in 10 states.

Last month, analysts at London-based investment bank Barclays estimated that Couche-Tard may have to divest 1,036 Speedway stores in a merger if the FTC forbids it from owning more than 35% of the stations in any given market, the Post said.

In Minneapolis, Couche-Tard has 223 Holidays and there are 80 Speedways, comprising 80% of the local market, according to Barclays. The concentration would be similar in other cities including Cincinnati, Detroit and Tucson, Ariz., it said. In New York City, there are 186 Speedways and only 21 Circle Ks so the combination would result in a likely acceptable 28% market share, Barclays said.

“While we certainly hope the FTC would take a much broader approach at assessing the size of the industry the c-stores compete in–including dollar stores, club stores, grocery stores, etc. … historically, definitions have been largely limited to the exact vertical,” Barclays said.

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