It indicates that Couche-Tard is putting capital to good use, as its ROE has ranged from 19% to 25% since 2009. It has grown from a single convenience store in Quebec in 1980 to more than 7,900 stores in North America, more than 2,200 stores in Europe, and about 1,500 licensed stores in the rest of the world today. Couche-Tard expects to finance the deal with available cash, existing credit facilities and a new term loan.
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Desjardins analyst Keith Howlett warned last week that Couche-Tard’s then-reported pursuit CST takeover could present regulatory hurdles. However, Couche-Tard’s return on equity (ROE) has been consistently high.
The deal, which includes assumed debt, would also add 165 sites in Georgia and north Florida, “largely filling out a geographic void we have in the U.S. Southeast” and strengthen Alimentation Couche-Tard’s footprint in Arizona and Colorado, he added.
The deal brings Couche-Tard thousands of locations in the southeastern U.S., Texas and NY, as well as eastern Canada, part of a push to use mergers to expand.
December 18, 2014: Adds more than 1,500 locations with acquisition of The Pantry for US$1.7 billion, including US$840 million in debt and capital leases.
In the USA, regulatory hurdles for the CST takeover are expected to be limited, according to Mizuho Securities’ Betty Chen. (CST) in an all-cash transaction for $48.53 per share.
Couche-Tard also agreed to sell some Canadian assets of CST for about $750 million, after the deal closes. Couche-Tard holds for his part that 290 shops south of the U.S. border.
Couche-Tard grows via organic growth, acquisitions, and mergers.
As Couche-Tard grows, its share price and dividend will likely grow at an above-average rate like it has in the past.
Couche-Tard’s founder and executive chairman, Alain Bouchard, said he’s always thought “size matters” in his industry, whether it be for purchasing, logistics, best practices or for becoming leaders for product categories.
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Campbell hinted at this in an interview with BNN, stressing that if Couche-Tard is planning a next move, it will not be immediately forthcoming.
