Mergers & Acquisitions

Couche-Tard Scales Up With ‘Game-Changing Growth’

Multiple deals in U.S., Canada, Europe contribute to ‘significant procurement synergies’
big red stores

Acquisitions have always been in Alimentation Couche-Tard Inc.’s DNA. The company has been defined by its exponential growth as a grocery retailer in Canada and as a convenience-store and fuel retailer in the United States and around the world. And Couche-Tard’s acquisition activities during its third-quarter 2023 and to date have continued that momentum.

Couche-Tard has reported net earnings of $737.4 million for its fiscal third-quarter 2023 ended Jan. 31, 2023, compared with $746.4 million for fiscal third-quarter 2022.

Total merchandise and service revenues were $5 billion in the United States, an increase of 3.5%. Same-store merchandise revenues increased by 4.8%. Merchandise and service gross margin decreased by 0.4% to 33.2%.

Across its global network, Couche-Tard had “strong double-digit growth” in its food program, as well as in private-label items, Brian Hannasch, president and CEO, said during the earnings call on March 16.

U.S. same-store road transportation fuel volumes decreased by 2.3%. Road transportation fuel gross margin was 46.85 cents per gallon (CPG). “Fuel margins remained healthy throughout the network due to favorable market conditions and the continued work on the optimization of the supply chain,” the company said.

Building, Selling and Buying

Couche-Tard completed the construction of 34 stores and the relocation or reconstruction of four stores, for a total of 91 stores since the beginning of fiscal 2023. As of Jan. 29, the company had another 60 stores under construction.

During the quarter, as a result of an ongoing strategic review of its network, Couche-Tard entered into multiple sales agreements with various buyers for 31 sites in the United States. As of Jan. 29, the assets and liabilities related to these sites were classified as held for sale, and the company expects they will be sold during fiscal fourth-quarter 2023.

Following the end of the quarter, on Feb.8, Couche-Tard closed on the acquisition of 65 True Blue express tunnel car wash sites under the Clean Freak and Rainstorm brands in core markets in the Southwest and Midwest for $395.9 million.

The company also reached an agreement to acquire 45 Big Red Stores convenience and fuel sites in Arkansas. The companies expect the transaction to close in the first half of 2023, subject to customary closing conditions and regulatory approvals.

Also, as part of an agreement reached with the Competition Bureau of Canada over its acquisition of the Wilsons gas station network, Couche-Tard announced on March 1 that it had  completed the sale of 52 sites to Saint-Thomas, Quebec-based Harnois Energies, for $77.6 million. It included a portion of a retail convenience stores and fuel network in the Maritime provinces under the Esso, Wilsons Gas Stops, Go! Stores and Coast Gas brands.

But in its biggest recent deal, Couche-Tard in mid-March agreed to acquire nearly 2,200 gas stations and convenience stores in Europe from TotalEnergies for approximately $3.3 billion. Couche-Tard made a “firm and irrevocable” offer to acquire the assets and entered into exclusive negotiations to purchase 100% of the French oil company’s retail assets in Germany and the Netherlands and a 60% controlling interest in its retail assets in Belgium and Luxembourg. The deal also remains subject to customary company and regulatory approvals.

The retail assets included in the proposed acquisition cover 2,193 sites: 1,195 in Germany, 566 in Belgium, 387 in Netherlands and 45 in Luxembourg. Of those sites, 68% are company owned and 32% are dealer-owned. Also, 975 of the sites include car washes.

“Adding TotalEnergies’ assets will be game-changing growth for our network,” said Hannasch. “For some time, we’ve been seeking a sizable acquisition,” he said. “This one will grow our European network by close to 80%, bringing value to our shareholders and being a strong geographic and strategic fit. These are high-quality locations with very strong market positions in each country and in close proximity to our current footprint in Europe. By growing into Europe’s largest market, Germany and other European markets near our successful Scandinavian, Irish, Polish and Baltic networks, we believe we can generate material synergies, and create additional growth opportunities in some of Europe’s strongest economies.”

He added, “We’d like to believe that the scale we now have in Europe will yield significant procurement synergies,” which have yet to be quantified. “Obviously we're in the middle of a process … but we'll continue to look to optimize the business.”

The company has yet to decide on whether it will rebrand the TotalEnergies. “Rebranding to be determined,” Hannasch said. “[But] we’ve been very clear, Circle K is our global brand. So we’ll make the right decision at the right time. If we did anything, I think it would more likely show up on the store, as opposed to the forecourt in the near term, but again over the coming months, we’ll firm up those plans.”

  • Alimentation Couche-Tard is No. 2 on CSP’s 2023 Top 40 update to the 2022 Top 202 ranking of convenience store chains by store count. Watch for the full 2023 Top 202 in June.

Laval, Quebec-based Couche-Tard’s 24-country global c-store network includes approximately 9,300 locations in North America, with more than 7,100 in the United States, primarily under the Circle K and Holiday Stationstores banners, and approximately 2,100 in Canada under the Circle K, Mac’s and Couche-Tard banners.

In Europe, under the Circle K and other banners, Couche-Tard operates a retail network in Scandinavia (through the 2012 acquisition of Statoil Fuel & Retail), Ireland (through the 2016 acquisition of Topaz Energy Group), Poland, the Baltics and Russia including more than 2,700 stores and unmanned automated fuel stations. And under licensing agreements, more than 2,200 stores operate under the Circle K banner in 15 other countries and territories (Cambodia, Egypt, Guam, Guatemala, Honduras, Hong Kong, Indonesia, Jamaica, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam). This brings Couche-Tard’s worldwide total network to approximately 14,300 mostly Circle K-branded c-stores, of which approximately 10,900 offer motor fuel.

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