It's Official: Couche-Tard Takes Ownership of CST
LAVAL, Quebec — Alimentation Couche-Tard Inc. has officially taken ownership of San Antonio-based CST Brands Inc., completing the $4.4 billion deal that was announced in August 2016.
Post-acquisition, Couche-Tard has increased its convenience store count in the United States and Canada by nearly 1,300 locations, including 666 stores in Texas.
"It is a great day for our investors, our employees and, above all, for our customers. CST is the fourth-largest network of convenience stores and fuel retailing in North America," said Couche-Tard President and CEO Brian Hannasch. "This transaction is the biggest in Couche-Tard's history and will strengthen our footprint in the United States, especially in Texas and the Southeast region, as well as in Canada (Québec, Atlantic provinces and Ontario), which brings our total store count in North America to close to 9,500 and close to 14,000 worldwide."
The closing comes after the U.S. Federal Trade Commission gave its approval to the deal, contingent upon Couche-Tard divesting 70 retail fuel locations to Dallas-based fuels distributor Empire Petroleum Partners.
"In CST, we acquire a company with strategic value that will efficiently complement our network. We bring in great new locations as well as expertise and experience which are likely to allow us to venture into new opportunities. Furthermore, we are proud to welcome aboard 14,000 new employees who will all become part of our journey to become the world's preferred destination for convenience and fuel," Hannasch added.
In Canada, the country's Competition Bureau also gave clearance for the acquisition following a review and consent agreement reached with the commissioner of competition. Red Deer, Alberta-based Parkland Fuel Corp. has signed an agreement to purchase the majority of CST's Canadian assets for approximately CA $985 million.
The Canadian assets set to change hands include 100 percent of CST's commercial cardlock and commercial and home energy businesses; substantially all of CST's dealer and commissioned agents business; 159 of CST's company-operated stores; and CST's corporate head office in Montreal.
Couche-Tard's purchase of CST also includes all of the membership interests of the sole member of CrossAmerica GP LLC, the general partner of CrossAmerica, all associated incentive distribution rights in the partnership and approximately 21 percent of CrossAmerica limited partner units.
"We are excited by the tremendous opportunity for CrossAmerica and its unitholders created by this merger," stated Jeremy Bergeron, president and CEO of CrossAmerica Partners LP. "In the coming weeks, as we begin this new chapter of the partnership, we will work closely with Couche-Tard to detail our strategic plans for the future."
Alex Miller, Couche-Tard's senior vice president of global fuels, becomes CrossAmerica's chairman of the board of directors, effective immediately.
"I look forward to working with Jeremy, his leadership team, and other members of CrossAmerica's board of directors," Miller said. "By capitalizing on CrossAmerica's recognized strength as a wholesale fuels distribution leader, we will be able to unlock additional value for all our investors."
A LOOK AT THE FUTURE
Although Couche-Tard has not discussed its plans regarding potential rebranding of CST's convenience stores, industry analysts and experts believe they will eventually become Circle K stores, allowing Couche-Tard to expand global recognition of the brand.
"They are buying sites with c-stores so they can immediately re-identify and rebrand to expand their brand in Texas, where they are already pretty big. It also gets them in California and a few other states where their presence is not as heavy," Ken Shriber, managing director and CEO of Petroleum Equity Group, told Convenience Store News.
Dennis Ruben, executive managing director of NRC Realty & Capital Advisors LLC, predicted that such rebranding will begin within the first year of new ownership.
"They look at each deal separately to see how to transition it. We sold them a chain in Texas and some stayed and some were converted. There may be markets they convert to Circle K and some where they keep the Corner Store name, but generally they convert stores to their brand," said Ruben.
The deal will also have an impact on the c-store industry at large, particularly for companies that bid against Couche-Tard for future acquisitions.
"In the last few years, there has been an ongoing consolidation, and when we do deals, there is a big number of larger buyers who could do a deal without having to get financing," Ruben said. "I think this will mean a less competitive environment for deals because with Couche-Tard buying CST, there is one less big player to call."
Those in direct competition with Couche-Tard will find it harder to compete on price, making it more important to differentiate themselves in other ways, such as foodservice and loyalty programs.
"Some Circle Ks are branded Shell and they have a loyalty program, but many are unbranded," Ruben noted. "If a store competes in an area with Circle K and they offer a loyalty program, this is something they should promote."
Laval-based Alimentation Couche-Tard operates convenience stores and retail fuel sites worldwide.
Headquartered in San Antonio, CST employs more than 14,000 team members at more than 2,000 locations throughout the Southwestern United States, Georgia, Florida, New York and Eastern Canada. Its U.S. banners are Corner Stores, Nice N Easy Grocery Shoppes, and Flash Foods. In Canada, CST is the exclusive provider of Ultramar fuel and its Dépanneur du Coin and Corner Stores.