Bouchard Comments on Circle K Acquisition

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Bouchard Comments on Circle K Acquisition

MONTREAL -- ConocoPhillips Inc. is selling its Circle K Corp. chain of convenience stores and gas stations to Canada's aggressive Alimentation Couche-Tard Inc. for $830 million as it moves to shed retail businesses to concentrate on wholesaling. Laval, Quebec-based Couche-Tard, Canada's leading convenience store operator, said on Monday the deal will make it the fourth-largest convenience store operator in North America.

Circle K operates convenience stores, restaurants and gas bars in 16 states, including Arizona, California and Florida, and the chain will expand Couche-Tard's U.S. presence by 1,633 stores, according to Reuters. The U.S. deal is the latest in a string for the Canadian company and more may be on the way.

"It is out of the question for now but it could be our next platform for acquisitions in 18 to 24 months," Alain Bouchard (pictured), Couche-Tard's chairman and president and CEO, told analysts in a conference call. "There is some room for expansion on the east side of the United States. There is room for growth, but later on."

Couche-Tard made its first purchase in the U.S. Midwest in May 2001 and has steadily added to its network since then. Last March, it bought 92 more Dairy Mart stores in the United States. Houston-based petroleum company ConocoPhillips, the number-three U.S. oil company and the nation's largest oil refiner, said it expected the deal to close in December. It will use the proceeds to pay down debt.

Bouchard said deal would offer Couche-Tard about $50 million in annual cost savings. "I am confident we can maintain margins and reduce the number of suppliers," he said.

The deal includes assumed debt of $9.1 million, and a five-year fuel supply agreement with ConocoPhillips.

Most Circle K employees are expected to stay in their jobs, Couche-Tard said. The company does not plan to close stores and the Circle K brand will be kept. "We will build a more decentralized organization," said Real Plourde, chief operating officer at Couche-Tard.

The company said the acquisition will give it a network of 4,630 stores with $6.57 billion in annual sales and approximately $70 million in profit.

Couche-Tard, which operates in Canada under brands such as Couche-Tard, Mac's and Beckers, said it would equip its U.S. stores with scanning technologies, improve distribution and set up a leaner structure. The deal will be financed through the sale of stock and debt restructuring.

"The objective will be to reduce that debt quickly," said Couche-Tard chief financial officer Richard Fortin.