It may not be among the glamour industries, but there’s much to be said for the convenience store business in all countries of the world. When consumers run out of whatever they need, wish or desire – and the hour is ungodly – where better to go? This week, one of the heavy hitters in the convenience store competition in Canada cast its glance across the pond, and appeared to have come up nuggets, a reality reflected in its stock price.
Laval, Quebec-based Alimentation Couche-Tard (T.ATD.A) claims a leadership role in the Canadian convenience store industry. In North America, Couche-Tard is the largest independent convenience store operator (whether integrated with a petroleum company or not) in terms of number of company-operated stores. It owes this foremost positioning to the 53,000 people working in its stores and executive offices and reaches annual revenues of over $15.8 billion.
The company quickened pulses in Canada and beyond this week with the announcement that it was bellying up to buy Norwegian-based Statoil Fuel & Retails ASA (SFR) for $2.8 billion U.S., or 53 Norwegian kroner (about $9.27 U.S.) per share.
Statoil Fuel & Retail is the number-one Scandinavian convenience and fuel retailer with over 100 years of operations in the region. It has a broad network and leading market share across Scandinavia and the Baltic States, as well as a growing presence in Poland with approximately 2,300 full-service or automated stations, of which approximately 68% are company-operated.
A news release accompanying tidings of the purchase trumpeted that it would provide Couche-Tard with "expanded geographic footprint, diversification and a European platform for future profitable growth."
Moreover, said Couche-Tard CEO Alain Bouchard, "we strongly believe that our all-cash NOK 53 per share proposal is compelling for Statoil Fuel & Retail’s shareholders as it offers them the opportunity to realize full and immediate value for their investment. Moving into Scandinavia and Europe is an important step in implementing Couche-Tard’s growth strategy."
Couche-Tard is offering to pay the equivalent of 6.9 times enterprise value over EBITDA based on SFR's 2011 earnings. It is funding the deal with a new three-year, $3.2-billion credit facility and an existing $1.5-billion credit line.
As for Norway providing the end of the story, the answer is a firm "nein!" For companies in Germany, the United Kingdom, Belgium, the Netherlands, and Luxembourg are reportedly next on the potential shopping list for Couche-Tard as oil producers like Royal Dutch Shell PLC and Exxon Mobil Corp. divest retail assets over time.
Investors surely felt the tingle from this week’s exciting news. The initial buzz from the Norwegian buy caused the stock to soar to $41.00 on Wednesday, a new 52-week high, before settling Thursday to $38.70, then back up to $39.11, where it closed on Friday. With more takeover targets in sight, Couche-Tard may prove the early bird that picks up a lot of strength in the convenience store derby.
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