SAN ANTONIO — Imperial Oil Co. has announced its intention to sell 500 Esso retail stores in Canada, and CST Brands Inc. is seen as a logical buyer for at least some of the assets, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC.
“…We believe CST Brands Inc. could be a logical buyer for some of the stores in Quebec/Ontario that overlap with its existing footprint,” Herzog wrote in a research note released Wednesday. “Given CST’s M&A [mergers and acquisitions] sweet spot of $50-$100 [million], we think it could acquire around 40 [to] 125 Esso stores, which we believe would be immediately accretive to earnings, adding around 5 cents to 15 cents to EPS [earnings per share].”
San Antonio-based CST Brands operates nearly 1,900 locations throughout the southwestern United States, New York and eastern Canada.
As part of its strategic development plan in Canada, CST signed an agreement with Imperial Oil Ltd. in 2014 that enabled it to sell Esso-branded gasoline in the country, as CSNews Online previously reported. The retailer added the Esso brand to its portfolio of gasoline brands and opened its first service station under the Esso banner in Port Hope, Ontario, in December 2014.
“CST’s agreement with Imperial is part of our strategic development plan in Canada. By signing agreements with oil companies to market branded fuel, the presence of the Corner Store banners will have a greater presence in the Canadian marketplace,” Christian Houle, senior vice president, Canadian Retail, CST Brands, said at the time. “Adding a recognized brand like Esso will be an asset for CST, which intends to accelerate its development in Toronto and in western Ontario.”
CST is one of the largest independent retailers of motor fuels and convenience merchandise in North America. In the U.S., CST Corner Stores sell fuel and signature products such as Fresh Choices baked and packaged goods, U Force energy and sport drinks, Cibolo Mountain coffee, FC Soda and Flavors2Go fountain drinks. In Canada, CST is the exclusive provider of Ultramar fuel, and its Dépanneur du Coin and Corner Stores sell signature Transit Café coffee and pastries.
CST also owns the general partner of CrossAmerica Partners LP, a master limited partnership and wholesale distributor of motor fuels based in Allentown, Pa.