Alimentation Couche-Tard’s $1.6-billion deal to buy 279 Esso gas stations is heavy on the Timbits

TORONTO – Alimentation Couche-Tard Inc. waited for more than three years to get the Ontario and Quebec retail assets of Calgary-based gas and oil company Imperial Oil Ltd.

Couche-Tard leader Brian Hannasch known as the acquisition of 279 Esso brand gasoline stations for $1.6-billion a “transformative” cope with an attractive link-up to the Tim Hortons brand, one which provides a sizable boost towards 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 really unique mixture of iconic brands in Canada,” Hannasch said on a media conference 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 British Columbia.

Jean Bernier, Couche-Tard’s group president of global fuels and northeast operations, said the deal “adds not only to our convenience store business but significantly adds to our fuel business, specifically in Ontario, where we were a significant small player.”

The Laval, Que.-based retailer has about 500 locations in Ontario, but handful of them sell fuel. The brand new sites will be very complementary to Couche-Tard’s existing network, he said, with hardly any overlap between locations.

“We are really getting a great presence within the (gta). It’s a great market, one of the greatest metropolitan markets in The united states,” having a high annual fuel volume of 8.5-million litres.

Most of the Ontario locations also have a full Tim Hortons outlet – something less than 20 of Couche-Tard’s locations across the nation have finally – with convenience store sales averaging $1-million per site.

“That is lower than our average for us, and that we think there is a great chance of us to continue to develop that provide,” Bernier added.

The deal brings how big Couche-Tard’s Canadian network to 2,100 stores, while 7-Eleven will have about 650 after the deals close later this season. Officials with 7-Eleven didn’t have further comment Wednesday.

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Convenience stores have come under pressure in recent years 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 economic. “From ordering ahead online to pick up (merchandise) and extending store hours, everyone is getting into an assorted bag of merchandising and adding conveniences which have kind of thrown traditional convenience stores in to the lurch.”



As such, he explained, industry consolidation one of the bigger players keeps obtaining. “These are wonderful acquisitions for Couche-Tard and 7-Eleven.”

Couche-Tard is a key player in the industry-tie-ups, acquiring more than 7,000 stores in the past decade, including the US$1.7-billion acquisition of North Carolina-based The Pantry Inc.’s 1,500 locations last 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 isn’t expected to diminish: Texas-based CST Brands, which operates 1,900 convenience stores in Canada and the U.S., said a week ago that it is seeking ways to increase shareholder value, resulting in speculation that Couche-Tard may have an interest in its assets.

“If we’re invited to sign up along the way, we will certainly give that consideration,” Hannasch said Wednesday, adding the company had not taken a serious look at CST.

“From a theoretical standpoint, we think we’re able to probably do a deal that size, but first we would have to understand whether we’re 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 selection of what Couche-Tard would typically pay for such assets in The united states.

When the latest deal closes, Imperial Oil’s supermarkets in Quebec is going to be rebranded as Couche-Tard as well as in Ontario they will be rebranded to Circle K, part of an attempt announced last fall to harmonize banners such as Mac’s with Couche-Tard’s largest global brand, and to streamline costs.

Imperial Oil had been selling off its chain of just one,700 Canadian fuel stations for quite some time and announced in January 2015 it had been considering selling its remaining service stations.

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