Couche-Tard in talks with French grocer Carrefour on possible deal


A person walks past a Couche-Tard in Montreal on May 21, 2020.

Christinne Muschi / Le Globe and Mail

Canadian convenience store giant Alimentation Couche-Tard Inc. says it approached French grocer Carrefour SA with the goal of concluding a friendly transaction in what would be a significant change in strategy for the owner of the Circle K brand.

Couche-Tard said in a statement Tuesday evening that it had entered into “exploratory discussions” with Carrefour about an agreement, the terms of which are still under discussion. At this point, it’s unclear whether the negotiations will result in a deal or a deal, the company said. Carrefour also confirmed that “very preliminary” discussions were underway.

The structure of a possible deal has not been disclosed, but discussions focus on the acquisition of Carrefour by Couche-Tard in its entirety and the divestiture of assets if necessary, said a person familiar with the matter. The Globe does not identify the source as they were not authorized to speak to the media.

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The takeover of the supermarket operator Carrefour would be a major bite for Couche-Tard. Shares of Carrefour have climbed 10 percent on the Paris Bourse this year, bringing the company’s market capitalization to 12.6 billion euros (about $ 15.4 billion). Couche-Tard, one of Canada’s largest companies by revenue, has a market value of $ 47 billion (US $ 36 billion).

It would also be a brutal strategic shift for the company in Laval, Quebec, and its president, Alain Bouchard. Couche-Tard has grown from a regional convenience store chain to a global titan through savvy acquisitions and organic growth. But he focused almost exclusively on convenience stores and gas stations. Adding a grocery store operator of this size would take it into largely uncharted territory, even though both companies sell food.

Couche-Tard hasn’t made a major acquisition since buying Texas-based CST Brands for US $ 4.4 billion in 2017. But that hasn’t stopped him from watching.

Japanese company Seven & i Holdings Co., the world’s largest convenience store operator, agreed last fall to buy the Speedway chain from Marathon Petroleum Corp. for 21 billion US dollars. Couche-Tard was also in the running for Speedway, a source familiar with the matter told The Globe and Mail, but apparently hesitated at the price, which values ​​Speedway at 13.7 times earnings before taxes, depreciation and amortization.

Couche-Tard also made a non-binding US $ 5.8 billion game for fuel retailer Caltex Australia Ltd., now known as Ampol, last year, but suspended its efforts after the COVID-19 pandemic has left Ampol’s outlook and cash flow uncertain. This situation has not improved and Couche-Tard now seems to have changed.

More recently, Couche-Tard made a small but strategic acquisition in Hong Kong which it believes will boost its future expansion in the region. In November, the company agreed to buy Convenience Retail Asia Ltd. for approximately 360 million US dollars.

As visibility “has turned cloudy” on the merits of an Ampol deal, more deals will almost certainly arise, Brian Hannasch, CEO of Couche-Tard, told The Globe and Mail in May. Buyout multiples, which show what an investor is willing to pay per dollar of profit, is just one part of a convenience store industry poised to transform in the coming months, he said. at the time.

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“We are sitting here with a good cash position. And if there are interesting assets or businesses at the right price and the timing makes sense… we’re ready, ”said Hannasch. He said the pandemic would open up new opportunities for takeover.

The Carrefour group operates 12,300 stores of different sizes in more than 30 countries but is concentrated in Europe, where it manages 2,800 supermarkets and around 700 larger hypermarkets. It also has a network of small convenience stores with sales areas of 200 to 900 square meters under Proxi and other names. The company plans to open 3,000 convenience stores by 2022, according to its website.

Carrefour achieved a turnover of 80.7 billion euros in 2019. It employs around 320,000 people.

“This would be a flawless acquisition” for Couche-Tard, said Brian Madden, senior vice president and portfolio manager at Toronto-based Goodreid Investment Counsel, which owns shares of Couche-Tard. “Carrefour has been in trouble for twenty years, and has never eclipsed its high stock price since the turn of the century. If Couche-Tard were to acquire the convenience stores on favorable terms, I think the market would welcome the transaction.

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