CCentral-Main-logo-EN-trans

Convenience Central
Join our community
extra content
Carrefour

Couche-Tard open to second chance to woo French food giant Carrefour, says CEO

CarrefourAlimentation Couche-Tard remains open to a second chance to consummate a union with Carrefour if the French government has a change of heart about its opposition.

But the company’s founder said it would look elsewhere in hopes of expanding and achieving its strategy to double its adjusted operating earnings by 2023.

“It would be interesting to have another string in our bow to do development and consolidation,” executive chairman Alain Bouchard told The Canadian Press in a video conference Monday.

Couche-Tard abandoned its potential $25-billion offer for Carrefour after French Finance Minister Bruno Le Maire told the Quebec businessman that he refused to let a potential takeover proceed because he felt the deal would put food security at stake.

Bouchard said he was surprised that Le Maire justified his opposition based on food security, even as the two sides were on the verge of a deal.

“This surprised us greatly because we weren’t going to move the stores,” he said, adding that COVID-19 hasn’t helped.

“The pandemic has made people withdraw into themselves and politicians have wanted to be careful. We didn’t expect it, but I understand.”

Screen Shot 2020-09-28 at 4.31.02 PMEarlier, chief executive Brian Hannasch told analysts that the Carrefour file may not be permanently closed.

“We like the transaction and we’d love to do the transaction. So if we got signals that the environment could change or would change from the French government or other key stakeholders, we’d love the opportunity to re-engage under the right conditions,” he said in a conference call.

For the time being, however, he said talks remain on ice with the two retailers instead examining the possibility of co-operating in areas such as fuel distribution. private label and joint purchasing.

This transaction, which would have been Couche-Tard’s largest acquisition, would have allowed it to become among the five largest retailers in the world, Hannasch said.

The convenience store operator has been evaluating its options for several years to grow its global business by moving into sectors such as grocery, dollar stores, fast food and travel-related food outlets.

“While looking at a grocery chain, we never wavered from our commitment to fuel that’s fundamental to our business,” he said in answer to investor concerns voiced by analysts.

As a retailer, first and foremost, Hannasch said retail channels are blurring at a fast pace as the landscape changes.

He said it looks at its core business and adjacent opportunities with its “eyes wide open that the world is changing and it’s going to take competitors with the right scale and the right culture and the right focus to win.”

Bouchard reminded analysts that the company has made bold moves in the past, including the purchase of Circle K in the U.S. and Statoil Fuel & Retail in Europe.

“Was I hoping our bold approach to Carrefour have turned out differently? Of course,” he said.

“Yet, I’m tremendously proud that Couche-Tard has the financial strength and acumen to make such an offer, proud that many more around the world understand and support the strong foundation and history of our company and proud that we showed an entrepreneurial spirit, all the while reaffirming our commitment to our core business and our double again strategy.”

Still, analyst Derek Dley of Canaccord Genuity lowered his target price for Couche-Tard shares to $46 from $53 because investors will view Carrefour as a strategic pivot for the company despite abandoning the deal.

“In our view, this announcement led to a sigh of relief among many investors, who, like us, questioned the rationale behind such a large transaction and a pivot into the highly competitive European grocery retail environment,” he wrote in a repot.

He said the Carrefour interest calls into question Couche-Tard’s longer-term strategy as its ambitions appear to shift to becoming a leading retailer rather than just a leading convenience store retailer.

“While we applaud this ambition, we certainly believe it caught the company’s investor base by surprise and changes the longer-term investment thesis for Couche-Tard.”


Couche-Tard chairman fails to convince French minister about Carrefour deal

The founder of Alimentation Couche-Tard walked away empty-handed Friday after trying to convince France’s finance minister to drop his objection to it acquiring grocery giant Carrefour.

Alain Bouchard met with Bruno Le Maire in Paris. His offer of various commitments was not enough to change Le Maire’s opposition over food security issues, according to information obtained by The Canadian Press.

Earlier, the minister expressed concerns about the potential $25 billion transaction.

“My answer is extremely clear: we are not in favour of the deal. The no is polite but it’s a clear and final no,” he said in a television interview.

Quebec Economy and Innovation Minister Pierre Fitzgibbon had said that the convenience store giant would have to demonstrate that food security was not at stake.

“I cannot say that I am surprised (by the reaction of the French government),” he said in a conference call.

Fitzgibbon said there appears to have been an “agreement in principle” with senior management at Carrefour and some of its largest shareholders, but the matter turned “political.”

Le Maire’s comments prompted Carrefour shares to decrease further below the 20 euro offer. Couche-Tard’s shares recovered some of their recent losses, rising 4.7%, or $1.69, to $37.98 in Friday trading on the Toronto Stock Exchange.

The Quebec-based convenience store retailer didn’t respond to requests for comment.

Analyst Irene Nattel of RBC Dominion Securities said France’s concerns are consistent with previous government posturing to the Pepsi/Danone deal in 2005 and rigorous conditions imposed on GE’s acquisition of Alstom’s power business.

Alimentation Couche-Tard’s interest in Carrefour caught industry analysts by surprise, who questioned the strategic fit between theconvenience store chain and Carrefour, France’s largest private-sector employer with more than 100,000 workers.

Founded more than 60 years ago, it operates nearly 13,000 hypermarkets, supermarkets and convenience stores in 30 countries including France, Spain, Italy, Brazil, Argentina and Taiwan. Its global workforce exceeds 320,000 employees.

“We see limited strategic fit for Couche-Tard in acquiring Carrefour due to minimal geographic and business overlap and we expect limited synergies,” wrote Mark Petrie of CIBC Capital Markets.

Despite the risks, he said the key part of the rationale would be to establish a platform for future consolidation.

“We believe Couche-Tard would likely use the Carrefour asset base to pursue further acquisitions with scale.”

Ultimately, Petrie said regulatory approval is uncertain even though he believes Couche-Tard would offer the French government assurances on food security and supply, as well as job protections.


Unknown

Couche-Tard, Carrefour consider partnerships after takeover talks end

Carrefour_logo.jpegAlimentation Couche-Tard Inc. and the French grocer it was courting say they have abandoned takeover talks but will consider future operational partnerships.

The Laval-based convenience store chain and Carrefour SA issued a joint statement saying they recently discussed a possible deal, but are no longer continuing with those conversations after recent events.

French finance minister Bruno Le Maire told Couche-Tard founder Alain Boucher on Friday in Paris that he refused to let a potential $25-billion takeover proceed because he felt the deal would put food security at stake.

Now Couche-Tard and Carrefour say they will look at how they can collaborate around fuel, purchasing volumes and private labels.

They will also examine partnerships that use innovation to enhance the customer experience and optimize product distribution across their overlapping networks.

If Couche-Tard’s friendly takeover attempt had been approved, the Quebec company would have taken control of a fifth of France’s groceries market and strengthened its global presence.

Federal International Trade Minister Mary Ng said in a statement Saturday that while the Canadian government was disappointed in news the takeover would not be proceeding, it was encouraged the two companies would continue to explore an operational partnership.

“At a time when it is more important than ever to support our workers and businesses, two-way trade and investments benefit businesses on both sides of the Atlantic and deepen our economic ties,” she said.


Unknown

Couche-Tard shares plunge as analysts question $25B offer for grocery chain Carrefour

Carrefour_logo.jpegAlimentation Couche-Tard’s $25-billion potential play for French-based grocery chain Carrefour SA got a thumbs down from its own investors and skeptical analysts.

The Quebec-based company’s shares plunged 10.5%, or $4.35 at $36.96 in midday trading on the Toronto Stock Exchange.

Analysts questioned the rationale for the non-binding takeover offer at a price of 20 euros per Carrefour share.

Peter Sklar of BMO Capital Markets said there’s “limited strategic rationale” for such an acquisition.

“We are skeptical that an acquisition of Carrefour by Couche-Tard or a combination of the two companies will come to fruition due to a number of considerations,” he wrote in a report.

A more compelling transaction, he said, would be to pursue Carrefour’s 7,700 global convenience stores.

Derek Dley of Canaccord Genuity called it a “questionable pivot.”

“We view the transaction as a bit of a headscratcher, as it would involve Couche-Tard partially departing from its core competencies of c-store and fuel retailing (which garner higher trading multiples) and instead venturing into the lower-multiple grocery business, which we believe would be viewed negatively by investors,” he wrote.

Dley added that the minimal geographic overlap and a challenging operating environment in France suggest that cost savings would be lower than Couche-Tard has realized in past transactions.

Still, the mostly cash transaction would be expected to add about 30% to his fiscal 2022 earnings estimate.

The acquisition would potentially be a good fit with Couche-Tard’s 2,700 stores in Europe, added Chris Li of Desjardins Capital Markets.

Carrefour’s convenience store account for about 10% of its US$9 billion in European revenues and US$500 million of EBITDA (earnings before interest, taxes, depreciation and amortization).

Couche-Tard could sell the grocery business but Li questions whether it makes sense to go through the trouble just to keep such a small share of the business.

“Based on Couche-Tard’s track record of walking away from deals that were either expensive or did not make strategic sense, we are confident this remains the case,” he added.

The lack of details about a potential transaction make it difficult to assess whether its historic financial discipline will be maintained despite its demonstrated willingness to “take bold steps to grow the company,” said Irene Nattel of RBC Dominion Securities.

She noted that retail operations are increasingly blurring with companies extending into adjacent businesses.

For example, Asda was purchased last October from Walmart by the consortium behind EG Group.

Couche-Tard said the terms of the proposal are under discussion and remain subject to diligence, but the consideration is expected to be in cash in large majority.

It cautioned that there can be no certainty at this stage if the talks will result in a deal.

Founded more than 60 years ago, Carrefour operates nearly 13,000 hypermarkets, supermarkets and convenience stores in France, Spain, Italy, Belgium, Poland, Romania, Brazil, Argentina and Taiwan.

About 48% of US$87 billion of revenues are in France, 30% elsewhere in Europe, 20% in Latin America and two% in Asia.

Carrefour has a market capitalization of US$15 billion compared with US$36 billion for Couche-Tard and an enterprise value of US$33 billion versus US$41 billion for the Canadian retailer.

Couche-Tard operates convenience stores mostly under the Circle K brand in Canada, the United States and Europe. It recently took steps to expand into Asia.

 


Carrefour_logo.jpeg

Couche-Tard makes $25B offer for French-based grocery chain Carrefour

Alimentation Couche-Tard Inc. has made a non-binding takeover offer for French-based grocery chain Carrefour SA worth about $25 billion.

The company confirmed it recently submitted a non-binding offer letter for a friendly deal at a price of 20 euros per Carrefour share.

Couche-Tard says the terms of the proposal are under discussion and remain subject to diligence, but the consideration is expected to be in cash in large majority.

It cautioned that there can be no certainty at this stage if the talks will result in a deal.

Founded more than 60 years ago, Carrefour operates nearly 13,000 hypermarkets, supermarkets and convenience stores in France, Spain, Italy, Belgium, Poland, Romania, Brazil, Argentina and Taiwan. The company released a simple statement in response to recent reports.

 

Screen Shot 2021-01-13 at 12.30.45 PM

Couche-Tard operates convenience stores mostly under the Circle K brand in Canada, the United States and Europe. It recently took steps to expand into Asia.