Couche-Tard to buy Corner Store owner in US$4.4B deal

Reuters — Canadian convenience store operator Alimentation Couche-Tard said on Monday it would buy U.S. convenience store chain CST Brands in a deal valued at about US$4.4 billion, boosting its presence in the southeastern U.S. and Eastern Canada.

San Antonio, Texas-based CST is one of the largest publicly traded fuel retailers in North America and also controls the general partner of gas station company CrossAmerica Partners.

The company, spun off from Valero Energy Corp. in 2013, also operates convenience stores and gas stations in Canada.

CST’s Canadian operations include 870 retail sites, mainly under the Corner Store and Depanneur du Coin brands, in Ontario, Quebec and Atlantic Canada, offering standard convenience-store snacks and beverages and, in many cases, market sections offering sandwiches, salads and fresh produce.

“With this transaction we would strategically strengthen our positioning in both the “sun belt” and the east coast of North America,” Couche-Tard CEO Brian Hannasch said in a statement Monday.

The Sun Belt refers to the region that stretches across the southern and southwestern portions of the U.S.

Laval, Que.-based Couche-Tard will offer CST Brands shareholders $48.53 per share in cash, a premium of 2.15 per cent to the stock’s Friday close (all figures US$).

However, the offer represents a premium of 41.9 per cent to CST’s closing price on March 3, the last trading day before the company said it would explore strategic alternatives.

CST, which has been under pressure from activist investors JCP Investment Management and Engine Capital, said in March it would explore strategic alternatives.

Excluding debt, the deal is valued at about $3.67 billion, based on Thomson Reuters data. Montreal law firm Davies Ward Phillips and Vineberg, which represents Couche-Tard, described the CST deal in a separate release Monday as Couche-Tard’s biggest ever.

The deal also underlines the Canadian convenience store operator’s position as one of most acquisitive players in the industry. Davies noted Couche-Tard, with about 7,900 stores in North America, is already the continent’s No. 2 convenience store chain behind 7-Eleven.

In Canada, Couche-Tard’s stores operate under the Couche-Tard, Mac’s and Circle K brands. The company operates over 1,400 stores in 10 provinces and the Northwest Territories and supplies almost 400 affiliated stores.

Couche-Tard, which has made at least eight acquisitions since 2014, agreed in March to buy 279 Esso-branded fuel and convenience sites from Imperial Oil for about C$1.69 billion.

Couche-Tard also said Monday it would sell some Canadian assets of CST to Parkland Fuel Corp. for about C$965 million, after the deal closes, expected in early 2017.

The assets include CST’s cardlock fueling stations, commercial and home energy business, and a number of company-operated stores to be determined following the Competition Bureau of Canada’s review of the transaction.

Red Deer, Alta.-based Parkland said the deal would make it the top fuel retailer in Canada, with over 1,555 sites, add the Ultramar brand to its portfolio and create “critical mass” for Parkland in Quebec and Atlantic Canada.

Couche-Tard said it would fund the CST deal with available cash, existing credit facilities and a new term loan.

Reporting for Reuters by Arathy S Nair in Bangalore. Includes files from AGCanada.com Network staff.

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