Couche-Tard buys 236 U.S. Shell stores

Alimentation Couche-Tard Inc.'s deal to buy 236 retail outlets from Shell Oil Products U.S. secures a beachhead in the fast-growing Denver market, with the convenience store giant showing no signs of slowing down its aggressive growth-by-acquisition strategy.

The Globe and Mail
October 6, 2006

Couche-Tard buys 236 U.S. Shell stores
Shows no signs of slowing its rapid growth
Bertrand Marotte

MONTREAL — Alimentation Couche-Tard Inc.'s deal to buy 236 retail outlets from Shell Oil Products U.S. secures a beachhead in the fast-growing Denver market, with the convenience store giant showing no signs of slowing down its aggressive growth-by-acquisition strategy.

"We've got a development team of 35 people knocking on doors, seeking out potential sites at our eight regional divisions [in North America]," said Couche-Tard vice-president and chief financial officer Richard Fortin.

He said Couche-Tard likely won't do another big acquisition like the Shell transaction before the end of the year, but that it remains on the hunt for smaller deals in the 25- to 40-store range.

Couche-Tard, based in Laval, Que., said yesterday it is buying 236 sites from Shell through its U.S. subsidiary Circle K Stores Inc.

No purchase price was disclosed, but Desjardins Securities analyst Jessy Hayem said in a research note that it's likely in the range of $165-million (U.S.) to $200-million.

The Shell retail outlets are spread out across a wide swath of the U.S.: 71 in Denver, Colo.; 22 in Baton Rouge, La.; 16 in Memphis, Tenn.; 28 in Orlando, Fla.; 46 in Southwest Florida; and 53 in Tampa, Fla.

Couche-Tard already has a strong presence in the U.S. Midwest, the Southeast, Florida and the Gulf region, Arizona and the West Coast.

It also operates about 900 Mac's stores in English Canada and 600 stores in Quebec under the Couche-Tard banner. About 80 per cent of sales are south of the border.

Pointing out that this is Couche-Tard's third purchase of Shell outlets in two years and that Shell is a major fuel supplier to the convenience store company, Ms. Hayem said such a close relationship could bode well for more deals.

Shell is the second-largest operator of convenience stores/gas stations in the U.S. and has signalled it wants to sell company-owned stores in several markets, she says.

"We estimate that Shell has a network of 5,000 retail sites and that 20 per cent of these outlets could be up for sale."

The deal announced yesterday is Couche-Tard's second-largest acquisition since its $830-million purchase in late 2003 of about 2,000 Circle K stores in 16 U.S. states.

Couche-Tard boss Alain Bouchard said at the annual meeting last month that the company — the second-largest independent convenience store operator in North America — has the resources to pull off another Circle-K transaction within the next five years.

Ms. Hayem said the Shell transaction will add about $900-million in motor fuel and merchandise revenues to Couche-Tard's top line.

Couche-Tard rang up revenue of $10.1-billion in fiscal 2006.

It said yesterday it plans to spend about $45-million over the next 5 years to bring the Shell units up to Circle K standards.

On the Toronto Stock Exchange yesterday Couche-Tard class B shares closed up 99 cents
(Canadian) or 4.24 per cent at $24.34.


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