TORONTO – Alimentation Couche-Tard Inc. waited in excess of 3 years to acquire the Ontario and Quebec retail assets of Calgary-based gas and oil company Imperial Oil Ltd.
Couche-Tard leader Brian Hannasch known as the purchase of 279 Esso brand gasoline stations for $1.6-billion a “transformative” deal with an attractive link-up to the Tim Hortons brand, one that provides a sizable boost to the company’s leading position in Canadian convenience store retail.
Imperial Oil to market remaining 497 Esso stations to five fuel distributors for $2.8B
The buyers include Alimentation Couche-Tard, 7-Eleven Canada, Harnois Groupe petrolier, Parkland Fuel, and Wilson Fuel Co.
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“We believe it is a very unique mixture of iconic brands in Canada,” Hannasch said on a media business call Wednesday.
The Laval, Que. company was certainly one of five players named Tuesday as acquirers of the 497 Esso sites for $2.8-billion, and Couche-Tard scooped in the highest number – 229 in Ontario and 50 in Quebec; followed by rival 7-Eleven, which acquired 148 sites: 74 in Alberta and 74 in Bc.
Jean Bernier, Couche-Tard’s group president of worldwide fuels and northeast operations, said the offer “adds not only to our convenience store business but significantly contributes to our fuel business, particularly in Ontario, where i was quite a small player.”
The Laval, Que.-based retailer has about 500 locations in Ontario, but handful of them sell fuel. The new sites will be very complementary to Couche-Tard’s existing network, he said, with hardly any overlap between locations.
“We are actually getting a great presence in the (gta). It’s a great market, one of the biggest metropolitan markets in The united states,” with a high annual fuel amount of 8.5-million litres.
Most of the Ontario locations also have a full Tim Hortons outlet – something fewer than 20 of Couche-Tard’s locations across the nation have now – with convenience store sales averaging $1-million per site.
“That is gloomier than our average for all of us, and we think there is a great chance of us to continue to grow that provide,” Bernier added.
The deal brings the size of Couche-Tard’s Canadian network to 2,100 stores, while 7-Eleven will have about 650 following the deals close later this season. Officials with 7-Eleven had no further comment Wednesday.
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Convenience stores have come under pressure recently as traditional grocery and drug retailers have extended their hours and opened smaller-format neighbourhood stores.
“You are visiting a convergence of factors here,” said Ken Wong, marketing professor at Queen’s University School of Business. “From ordering ahead online to get (merchandise) and extending store hours, everyone is getting into a mixed bag of merchandising and adding conveniences that have kind of thrown traditional supermarkets in to the lurch.”
As such, he said, industry consolidation among the bigger players keeps picking up. “These are wonderful acquisitions for both Couche-Tard and 7-Eleven.”
Couche-Tard has been a key player within the industry-tie-ups, acquiring a lot more than 7,000 stores in the past decade, such as the US$1.7-billion purchase of North Carolina-based The Pantry Inc.’s 1,500 locations this past year and a 2012 European mega-deal, paying US$2.8-billion for just two,300 stores owned by Norwegian oil-and gas giant Statoil ASA as well as associated fuel storage areas and property.
The pace of deals is not likely to diminish: Texas-based CST Brands, which operates 1,900 convenience stores in Canada and also the U.S., said last week that it is seeking methods to increase shareholder value, resulting in speculation that Couche-Tard may have an interest in its assets.
“If we are invited to participate in the process, we will certainly give that consideration,” Hannasch said Wednesday, adding the organization hadn’t taken serious consideration at CST.
“From a theoretical standpoint, we think we’re able to probably do a deal that size, however we would need to understand whether we are interested or not.”
Keith Howlett of Desjardins Securities said inside a note to clients that CST Brands, valued at US$4.3 billion, is above the upper range of what Couche-Tard would typically purchase such assets in North America.
When the latest deal closes, Imperial Oil’s convenience stores in Quebec will be rebranded as Couche-Tard as well as in Ontario they will be rebranded to Circle K, a part of an attempt announced last fall to harmonize banners for example Mac’s with Couche-Tard’s largest global brand, and to streamline costs.
Imperial Oil have been selling off its chain of just one,700 Canadian fuel stations for several years and announced in January 2015 it was considering selling its remaining service stations.
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