By Ross Marowits
The Canadian Press
Paul Chiasson - CANADIAN PRESS
April 18, 2012
MONTREAL – Canada’s largest convenience store chain is launching a long-anticipated overseas expansion with a US$2.8-billion friendly deal to buy Scandinavia’s leading oil retailer.
Alimentation Couche-Tard’s shares hit a series of all-time highs on the Toronto Stock Exchange on Wednesday after the deal for Statoil Fuel & Retail ASA, the independent retail operations of Norway’s state oil company, was announced.
The stock closed up 15.4 per cent, or $5.30, at C$39.60.
“We have been looking in Europe for over five years to find the right opportunity and even though we have had discussion with multiple companies, eventually Statoil Fuel & Retail was the right one,” CEO Alain Bouchard told a news conference in Oslo.
Statoil Fuel & Retail has 2,300 gas bars and convenience stores.
Including assumed debt, the deal values the company at $3.6 billion, and represents Couche-Tard’s largest ever acquisition, making it the largest independent convenience store operator in North America and Europe.
The transaction will be funded from existing credit facilities and a new three-year US$3.2-billion acquisition credit facility.
The friendly deal comes about 18 months after Couche-Tard retreated from its failed hostile bid for Casey’s General Stores (Nasdaq:CASY), an Iowa-based company operating in several Midwest states.
Bouchard said the European acquisition positions the Quebec-based retailer to further expand its geographic footprint by going after opportunities with other major oil companies that are expected to sell their retail networks.
The acquisition comes after months of studying Statoil’s operations and top management visiting more than 200 stores in several Scandinavian cities.
Statoil Fuel & Retail chairman Birger Magnus said the deal has the potential to be “a very positive milestone for the organization.”
The company said the offer fairly reflects its value and the buyer has a good track record of acquiring and developing companies through a decentralized business model.
“The way they present how they’re going to develop this company further is very promising. They believe that Statoil Fuel & Retail could be an important step stone for future expansion in Europe,” he told reporters.
While Couche-Tard has fought unionization efforts in Quebec, it is buying a largely unionized company as is generally the case in Scandinavia. In fact, the union has a representative on Statoil’s board of directors.
Bouchard said he met with eight union leaders and both sides concluded that on some subjects they would “agree to disagree.”
Most of Statoil Fuel & Retail’s earnings come from the three Scandinavian countries Norway, Sweden and Denmark which have relatively healthy economies compared with other parts of Europe, Couche-Tard’s chief financial officer Raymond Pare said in a separate call with analysts.
“This is one of the factors that we took into consideration when we did our analysis of this potential acquisition,” Pare said.
Statoil’s retail operations have also expanded into Central Europe, particularly Poland, providing a growth opportunity, he said.
“What was the most important thing was to find a real strong management team that we have to have in order to start to develop in the northern part of Europe. And with this acquisition, we feel that we have found the people that will help us establish our base there,” Pare said.
Couche-Tard plans to run Statoil Fuel & Retail will be run as a stand-alone business unit and retain existing management. It has the right to use the Statoil name for eight years.
The deal is expected to close in June and be immediately accretive to net earnings. It will add US$12.6 billion of annual revenues to the US$22.7 billion posted by Couche-Tard, and raise profits by US$1.7 billion to US$4.6 billion.
Irene Nattel of RBC Capital Markets said the transaction gives Couche-Tard scale in Europe at a reasonable price.
“But investors will want reassurance around quality of assets/systems, and Couche-Tard’s plans for how to manage a network of 2,300 stores in a different, new market on another continent,” she wrote in a report.
Alimentation Couche-Tard Inc. of Laval, Que. (TSX:ATD.B) currently has 5,817 stores in North America operating mostly under the Mac’s, Couche-Tard and Circle K banners.
Statoil ASA has agreed to tender its 54 per cent interest in Statoil Fuel & Retail to Couche-Tard’s offer, which is 52.5 per cent above the closing price on Tuesday.
On the Oslo stock exchange, Statoil Fuel’s publicly traded shares jumped 51 per cent after the announcement.