Alimentation Couche-Tard Inc.’s takeover strategy to the guardian firm of the 7-Eleven comfort retailer chain is probably the most bold concept but by an organization that was constructed on making one deal after one other.
Couche-Tard confirmed Monday that it has made a “friendly, non-binding proposal” to Japan’s Seven & i Holdings Co., which had a inventory market worth of about $38 billion as of Monday’s shut in Tokyo. There’s no assure any settlement may be reached, the corporate cautioned — and there are vital limitations to finishing such an enormous deal.
But when the Canadian firm can pull it off, it might be the achievement of a dream for founder and Government Chairman Alain Bouchard, who has been eyeing 7-Eleven for many years. Bouchard made his first strategy round 2005, in search of a take care of the Japanese firm for its US enterprise, in keeping with a biography printed a number of years in the past. The concept was shot down rapidly.
Bouchard moved on, focusing on a collection of comfort retailer and gasoline station offers within the US and Europe earlier than finally turning his sights on Carrefour SA in 2021. Negotiations on a $20 billion provide for the grocery store chain died within the morass of French politics, however final yr the corporate landed a smaller deal in Europe, buying about 2,200 shops from TotalEnergies SE for €3.1 billion ($3.4 billion).
Throughout a presentation in Phoenix, Arizona, final yr, Chief Government Officer Brian Hannasch and different executives made it clear to buyers and analysts that they have been nowhere close to completed. They laid out broad plans to scour the US, Europe, Latin America and Southeast Asia for acquisition targets.
“We are experts in closing and integrating M&A around the globe,” they mentioned in a doc introduced to buyers. “We have the balance sheet to consider very large deals where only a few others can play.”
If a takeover is accomplished, it might be the largest overseas acquisition ever by a Canadian firm, in keeping with knowledge compiled by Bloomberg.
“There has been a lot of ambition to go to Asia,” mentioned Bloomberg Intelligence analyst Diana Rosero-Pena. Couche-Tard has lower than 1% market share within the area, in contrast with 31% for Seven & i, she mentioned.
A deal could also be valued at as a lot as $86 billion, she wrote, primarily based on a a number of of 11.5 instances earnings earlier than curiosity, taxes, depreciation and amortization. Some analysts mentioned Monday that Couche-Tard can afford the acquisition, however would doubtless finance it with a mixture of debt and fairness.
Offers are within the firm’s DNA. All of it started within the Nineteen Eighties, when Bouchard arrange store in a Montreal suburb, beginning with a single comfort retailer, referred to as a dépanneur within the French-speaking Canadian province.
He sought first to consolidate in Quebec and in Canada — including tons of of shops throughout provinces — then moved into worldwide markets. Right this moment it has about 16,700 shops unfold in 31 nations and territories; about 75% of these areas have been added by way of acquisition.
The Circle Ok proprietor nonetheless sees extra alternatives within the US market. Lower than an hour after confirming its proposal to Seven & i, the corporate introduced the acquisition of 270 GetGo retail and fueling areas from Pittsburgh-based Large Eagle Inc. for an undisclosed quantity.
Couche-Tard is now the second-largest US operator with greater than 7,100 areas, representing about 5% of comfort shops, and one other 2,100 in Canada. The acquisition of 7-Eleven’s 13,000 areas in these two nations has the potential to lift competitors issues.
“We would also expect some level of divestitures will need to take place within the US industry, but Couche-Tard would want to keep the Speedway assets,” mentioned Raymond James analyst Bobby Griffin in a word to purchasers. Seven & i beat out Couche-Tard in an public sale for Marathon Petroleum Corp.’s Speedway gasoline stations in 2020.
A spokesperson for Couche-Tard declined to remark past the corporate’s Monday morning assertion. Within the firm’s most up-to-date quarterly earnings name, on the finish of June, Hannasch instructed analysts that just a few deal concepts had come throughout his desk, “a mix of both Europe and North America and a mix of size.”
“We’ll remain disciplined, we commit to that,” he mentioned, “but we’d like to think we can land a few opportunities over the coming quarters.”
CEO Change
Couche-Tard has had solely two CEOs in its historical past — Bouchard, who’s one in every of Canada’s richest folks with a fortune of about $8 billion, and Hannasch. That can change on Sept. 6, when Chief Working Officer Alex Miller takes the helm. Hannasch plans to stay with the group as a particular adviser for the following couple of years, with a concentrate on M&A.
Couche-Tard serves thousands and thousands of consumers a day with gas, meals, snacks and tobacco. About three-quarters of its income comes from gas, the place scale issues: the corporate is thought for flexing its negotiating muscle to generate increased margins on gasoline.
In recent times, the corporate has superior a technique to enhance its in-store gross sales, with recent meals merchandise akin to scorching sandwiches, pizza, rooster and different meals. Its merchandise and repair enterprise enjoys gross margins which are 3 times that of the gas enterprise.
