Couche-Tard & CST Deal Almost a Year in the Making

SAN ANTONIO — Alimentation Couche-Tard Inc. grabbed headlines last month when it revealed it had reached an agreement to acquire CST Brands Inc. However, the possibility of a deal dates back to fall 2015.

According to the San Antonio Business Journal, Couche-Tard first proposed a deal to buy CST in October, weeks before CST received letters from some activist investors, and months before it made changes to its board of directors in the face of investor unrest.

At that time, CST also announced a "strategic review" that was presumed to be the first step in considering a buyout, the news outlet added.

According to background information in CST's preliminary proxy statement to shareholders issued, Couche-Tard CEO Brian Hannasch reached out to CST's CEO Kim Lubel to set a meeting in mid-October. The two met on Oct. 20 and discussed "various matters concerning the convenience store industry." 

In addition, Hannasch "mentioned potential interest in a combination of CST and Couche-Tard," though he did not propose a price or any terms, and made no specific proposal. The next day, the CST board of directors was informed of Couche-Tard's interest, according to the news outlet.

Ten days later, CST received a letter from Couche-Tard describing a nonbinding proposal to acquire all of CST's common stock for $43.50 to $45.35 per share. The company's board met on Nov. 11 and consulted its financial adviser and legal counsel before directing Lubel to tell Couche-Tard "no."

According to the information, CST also rejected Couche-Tard's follow-up $46.80 offer.

However, Lubel met with Hannasch in Indianapolis to tell him that CST would be willing to discuss a potential sale of particular CST assets, including certain stores in the Western United States and businesses in Canada, the San Antonio Business Journal reported.

In January, Hannasch told Lubel that his company wasn't interested in a partial acquisition and, instead, increased its offer to $48.50. At one point, an oral offer of $49 was made.

While communication between the companies continued, CST also had discussions with two undisclosed entities — one described in the proxy statement as a "company with a convenience store business" and the other as an "industry participant." 

After a months-long bidding process, Couche-Tard and CST finally reached a merger agreement in August. Under terms of the $4.4-billion agreement, Couche-Tard will also acquire CST's interest in CrossAmerica Partners LP and associated incentive distribution rights, as CSNews Online previously reported.

Upon completion of the transaction, Circle K will establish a new business unit in San Antonio with attached shared services operations. The transaction is currently expected to close in early 2017.

Couche-Tard is based in Laval, Quebec. CST is based in San Antonio.

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