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Couche-Tard aims to double its size

couche-tard2-780x520Alimentation Couche-Tard will continue to focus on growing its U.S. footprint despite proposing an acquisition in Australia it hopes will be a springboard for expansion in Asia Pacific, the convenience store operator’s CEO said.

Brian Hannasch told analysts last week that the company remains focused on consolidating the large American market despite seeking opportunities in a new global geography.

“Despite our size, it’s a massive market, a healthy economy, healthy consumers, and it’s probably the market where we can achieve the greatest synergies,” he said during a conference call.

Hannasch said Asia Pacific is where more of the GDP growth over the next two decades is going to come for.

“So really, for the last three or four years, we’ve looked pretty hard in that market. And you all saw the press release about our offer to Caltex in Australia, which we think is very consistent with the strategy.”

Australia and New Zealand are stable, promising markets that resemble North America and Europe, he said.

“We see Caltex as a potential springboard to expand our presence in Asia Pacific should the Caltex Board choose to engage with us on a proposal.”

The retailer was proposing the largest acquisition in the company’s history with a $7.7 billion bid for Australia’s largest retail fuel and convenience chain, which operates about 2,000 service stations. Couche-Tard had raised its offer for Caltex to AU$34.50 per share after being rebuffed in October when it made a offer of AU$32 per share.

In breaking news, Caltex this week rejected the latest takeover offer, however it is giving the Canadian company a chance to increase its bid.

The Australian company says the current proposal undervalues the company and “does not represent compelling value for Caltex’s shareholders.”

However, the Caltex board has offered Couche-Tard access to selected non-public information to allow the Canadian company to come up with a revised offer. Couche-Tard already owns about 2% of Caltex shares.

Purchasing Sydney-based Caltex Australia Ltd. would allow the Quebec-based retailer to expand beyond North America and Europe as it aims to double the company’s size.

Derek Dley of Canaccord Genuity said the Caltex acquisition is far from complete with talks in the preliminary phase. He believes Couche-Tard is interested in purchasing Caltex’s entire business, which includes a refinery and wholesale fuel division, along with the company’s retail network. But he foresees it selling the non-retail network over time as the proposal multiple is on the higher end of deals that include a refinery.

“Therefore, while we believe Couche-Tard has a solid track record as an acquiror, we are not quite convinced on the strategic rationale of purchasing the entire asset at a high single-digit multiple,” he wrote in a report.

Keith Howlett of Desjardins Capital Markets says the offer has likely come to light because Caltex recently announced that it was planning to spin off a 49% interest in 250 retail sites into a REIT. In addition, Caltex shares have performed poorly and the current CEO has announced his plan to retire.

Alimentation Couche-Tard said last week that its net income surged by 21.5% to US$579.4 million in its fiscal second quarter, up from US$477 million a year earlier.

Excluding one-time items, adjusted profits for the three months ended Oct. 13 were US$571 million or 51 cents per diluted share, compared with US$466 million or 41 cents per share in the year prior. The retailer benefited from a 27.7% boost in U.S. fuel margins even though fuel revenues dipped nearly eight%.

Revenues decreased to US$13.68 billion from US$14.7 billion in the second quarter of 2018 with merchandise revenues increasing 2.3% to US$3.5 billion and network fuel revenues decreasing 8.8% to US$9.9 billion.

Merchandise same-store sales grew 3.2% in the U.S., 2.1% in Canada and 3.3% in Europe.

Couche-Tard was expected to earn 48 cents per share in adjusted profits on US$14 million of revenues, according to financial markets data firm Refinitiv.

Its convenience store network includes nearly 9,800 stores throughout North America and 2,700 in Europe. It employs almost 133,000 people and has licensing agreements for about 2,250 stores operated under the Circle K banner in 16 other countries and territories.


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Caltex rejects Couche Tard takeover offer, opens door for revised bid

Unknown-1Caltex Australia Ltd., Australia’s largest retail fuel and convenience chain, is rejecting a $7.7-billion takeover offer from Alimentation Couche-Tard Inc., however it is giving the Canadian company a chance to increase its bid.

The Australian company says the current proposal undervalues the company and “does not represent compelling value for Caltex’s shareholders.”

However, the Caltex board has offered Couche-Tard access to selected non-public information to allow the Canadian company to come up with a revised offer.

Caltex operates approximately 2,000 service stations.

Couche-Tard raised its offer for Caltex to AU$34.50 per share last month after being rebuffed in October when it made a offer of AU$32 per share.

Couche-Tard already owns about 2% of Caltex shares.


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Couche Tard makes C$7.7B bid for Australia’s Caltex

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Alimentation Couche-Tard Inc. is proposing the largest acquisition in the company’s history with a $7.7 billion bid for Australia’s largest retail fuel and convenience chain.

The unsolicited purchase offer for Sydney-based Caltex Australia Ltd. –  its second this year – would allow the Quebec-based retailer to expand beyond North America and Europe as it aims to double the company’s size.

Couche-Tard CEO Brian Hannasch described the proposal as “a very compelling offer” for Caltex shareholders.

“Alimentation Couche-Tard’s management team has been looking into the Asia-Pacific region for several years as a potential market for our continued growth and we see many opportunities,” he said in a news release.

“With Caltex, we see a potential opportunity to leverage our leading global position in the convenience retail market, and we would seek to bring all our operating expertise to bear to help support and grow the Caltex business.”

The proposal for AU$34.50 per share is for the redemption of all Caltex shares outstanding. Couche-Tard already owns about two per cent of Caltex shares.

This is an unsolicited, non-binding, conditional and confidential offer, Caltex said in a statement released Tuesday morning local time.

The proposal also includes the payment of certain dividends to shareholders at the time of the eventual takeover.

Caltex says Couche-Tard’s previous offer in October at AU$32 per share was rejected for being value too low.

The proposal includes no material asset sales or divestments and precludes Caltex’s planned property public offering.

Keith Howlett of Desjardins Capital Markets says the offer has likely come to light because Caltex recently announced that it was planning to spin off a 49% interest in 250 retail sites into a REIT. In addition, Caltex shares have performed poorly and the current CEO has announced his plan to retire.

“Given the complexity of the transaction, including the divestiture of non-retail assets, we conclude that Couche-Tard management foresees significant upside to the retail fuel and convenience business in Australia,” he said in a report.

The potential acquisition would be consistent with Couche-Tard’s five-year plan to double its size, added Irene Nattel of RBC Capital Markets.

“Based on conversations with management, Australian c-store networks are compelling due to a well-developed fuels industry, while generally undermanaged inside store operations provide meaningful opportunity to surface incremental value,” she wrote in a report.

Caltex operates approximately 2,000 service stations where it operates gasoline and retail sales.

The offer is subject to audit and approval, as well as a vote of the boards of directors of both companies involved.

Alimentation Couche-Tard said after markets closed on Tuesday that its net income surged by 21.5 per cent to US$579.4 million in its fiscal second quarter, up from US$477 million a year earlier.

Excluding one-time items, adjusted profits for the three months ended Oct. 13 were US$571 million or 51 cents per diluted share, compared with US$466 million or 41 cents per share in the prior year. The retailer benefited from a 27.7 per cent boost in U.S. fuel margins even though fuel revenues dipped nearly eight per cent.

Revenues decreased to US$13.68 billion from US$14.7 billion in the second quarter of 2018 with merchandise revenues increasing 2.3 per cent to US$3.5 billion and network fuel revenues decreasing 8.8 per cent to US$9.9 billion.

Merchandise same-store sales grew 3.2 per cent in the U.S., 2.1 per cent in Canada and 3.3 per cent in Europe.

Couche-Tard was expected to earn 48 cents per share in adjusted profits on US$14 million of revenues, according to financial markets data firm Refinitiv.

“We continue to experience steady results in our overall business with strong fuel performance and merchandise sales,” Hannasch stated in a news release.

“In the convenience sector, we are starting to see good traction from the different projects we launched, such as food pilots, our digital upsell platform, and the redesign of our European stores.

Couche-Tard’s convenience store network includes nearly 9,800 stores throughout North America and 2,700 in Europe. It employs almost 133,000 people and has licensing agreements for about 2,250 stores operated under the Circle K banner in 16 other countries and territories.


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Couche-Tard sells CrossAmerica ownership

Alimentation Couche-Tard Inc. sold its ownership interest in CrossAmerica Partners LP; however, the move will not affect the asset exchange pact between the two companies.

Couche-Tard reached the deal with investment entities controlled by Joe Topper, the founder of Allentown-based Cross America. Topper is a current member of the board directors of CrossAmerica’s general partner.

Unknown-5The CrossAmerica interests sold consist of 100% of the general partner interest, 100 percent of the incentive distribution rights and approximately 7.5 million CrossAmerica limited partner units. The transaction’s price tag was not disclosed.

According to CrossAmerica, Topper returns as chairman of the board of the company’s general partner. In addition, the transaction does not involve any capital outlay by CrossAmerica nor change its capital structure.

“At this time, we anticipate maintaining our current distribution policy, distribution coverage and leverage ratio targets that have been outlined over the past few quarters,” Topper said. “I am excited for the future of the partnership. In the coming weeks and months, I and the management team look forward to sharing in more detail with our unitholders our strategy and goals for CrossAmerica.”

Laval, Quebec-based Couche-Tard acquired CrossAmerica’s general partner, CrossAmerica GP LLC, as part of its acquisition of CST Brands Inc. in July 2017. That deal also gave Couche-Tard 100 percent of the incentive distribution rights in CrossAmerica, and approximately 6.9 million of CrossAmerica limited partner units.

The decision to sell its entire ownership interest came after a strategic review, according to Couche-Tard.

“The sale of our interest in CrossAmerica benefits both parties and allows each to focus on growing their core businesses. As we complete the remaining exchange of assets with CrossAmerica, we will continue to look for opportunities for future exchanges which create value for our shareholders and CrossAmerica’s unitholders,” said Brian Hannasch, president and CEO of Couche-Tard.

Greenhill & Co. acted as the exclusive financial and strategic advisor to Couche-Tard on the transaction. Faegre Baker Daniels LLP acted as the legal advisor to Couche-Tard. Skadden, Arps, Slate, Meagher & Flom LLP acted as the legal advisor for the investment entities controlled by Joe Topper.

ASSET EXCHANGE AGREEMENT

Couche-Tard and CrossAmerica also reached a pact for an additional asset exchange transaction between the two organizations. This new exchange includes a select portion of Couche-Tard’s U.S. dealer business and CrossAmerica’s ownership interest in CST Fuel Supply LP. Specifically:

  • Couche-Tard will transfer U.S. wholesale fuel supply contracts covering 387 sites and 45 fee and leasehold properties to CrossAmerica; and
  • CrossAmerica will transfer its 17.5% limited partner interest ownership in CST Fuel Supply LP to Couche-Tard.

Couche-Tard will retain its dealer sites in California and those operated through its RDK joint venture as well as other strategic fuel wholesale assets across different parts of the country.

The companies expect to close the exchange transaction in the calendar first quarter of 2020. It has been approved by the Conflicts Committee of the board of directors of CrossAmerica’s general partner, which was advised by Evercore as its independent financial advisor and by Richards, Layton & Finger, P.A. as its independent legal counsel.

It is the third and final tranche of the asset exchange agreement that was announced on Dec. 17, 2018. CrossAmerica said it anticipates continuing to explore opportunities for future exchanges with Couche-Tard that create value for Couche-Tard shareholders and CrossAmerica unitholders.

“The announcement of this most recent exchange of assets with Couche-Tard shows the tremendous growth opportunities for CrossAmerica and our ability to continue to increase value for our unitholders,” Topper said.

Skadden, Arps, Slate, Meagher & Flom LLP acted as the legal advisor and Matrix Capital Markets Group Inc. acted as the financial advisor for the investment entities controlled by Joe Topper.

Originally published at Convenience Store News. 


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Couche-Tard vying for piece of North American cannabis market

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Alimentation Couche-Tard Inc. wants to be one of the “key players” in the North American cannabis market by using its position in Canada – where use of the substance for recreational purposes is legal – to achieve this goal.

But the expertise to be developed by the operator of convenience stores and gas stations in selling the drug will have to be done outside of Quebec because of provincial rules limiting the sale of marijuana to government-run stores and online, company founder and executive chairman Alain Bouchard said Wednesday following its annual meeting.

“I think it’s a shame for Quebec because this expertise will go outside Quebec,” he said. “When we deploy a network in the United States or any other activities in the U.S., it will come from outside Quebec.”

Unable to penetrate the Quebec market, the Quebec multinational has invested in Alberta retailer Fire & Flower, which could enable it to eventually acquire a majority stake in this company.

This is in addition to its existing partnership with Canadian cannabis giant Canopy Growth surrounding the operation of private stores.

Even though the recreational cannabis market is still in its infancy, Couche-Tard wants to go out of its way to set up a strategy that is ready to be deployed where regulations allow it, Bouchard added.

“It’s still very small. We will learn from that and I really believe we can succeed.”

The parent company of Circle K has turned its sights to the United States, where recreational consumption of marijuana is legal in 13 states, says CEO Brian Hannasch, who noted the retailer has long experience selling age-restricted products. But it must take the time to know the rules of the game, he added.

Couche-Tard has already started selling cannabidiol (CBD) products, a compound with potential medicinal qualities but without significant levels of THC – a compound in cannabis that produces a high – in some stores in the U.S. and Ireland.

“It’s kind of the Wild West, but I think we have a place in this market,” said Hannasch. But this is only the beginning. “

By 2023, the multinational wants to double its operating profit, which was about US$4 billion last year. However, it did not identify marijuana as a growth driver in its strategic plan because of the many regulatory uncertainties.

Hannasch did not hide the fact that the market for recreational marijuana could, however, make it easier for the company, which currently operates a network of approximately 16,000 outlets in Canada, the United States, Europe, Latin America, Asia and the Middle East.

In the meantime, the retailer hopes that its organic growth will allow it to generate half of its growth target. The company particularly wants to focus on millennial customers who are “less loyal to stores, but more loyal to brands,” said Bouchard.

Couche-Tard is offering more efficient and faster payment options and has begun deploying its Lift digital platform in Canada, which sends personalized offers to consumers. The company is also testing home delivery in Texas and expanding its offering of food and beverage products.


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Couche-Tard’s new initiatives designed to meet rising customer expectations

Screen Shot 2019-09-10 at 11.04.38 AMAs Alimentation Couche-Tard Inc. has built up its Circle K footprint through a series of global acquisitions, the company has begun rolling out several in-store initiatives to meet its customers’ rising expectations.

Chief among those have been foodservice-related programs, such as the company’s coffee platform and hot dog offer — both of which have spelled success for the Laval-based parent company of Circle K. Additionally, in the past few quarters, Couche-Tard began upping the ante with new digital and loyalty solutions, including its Lift upselling program and recently launched Easy Pay rewards program.

“I’m pleased with the work leveraging our loyalty programs, like Lift and Easy Pay, and unique promotional activity and gamification across the network — all part of our global efforts to drive more traffic to our stores and make our customers’ lives just a little bit easier every day,” Couche-Tard president and CEO Brian Hannasch said during an earnings call last week for the company’s first-quarter fiscal year 2020.

Circle K’s Easy Pay program rolled out to all of its U.S. network, with the exception of Holiday Stationstores, during the latest quarter. The retailer expects to complete the rollout at the Holiday locations in the fourth quarter.

Hannasch reported that the company is pleased with the pilot tests of the program, but it is too early to assess the national rollout. The retailer will be testing a variety of discount levels, as well as store-level incentives, to understand how to maximize traffic and penetration, he explained.

As for Lift, the in-store upsell tool, it was in almost 5,750 of the company’s U.S. convenience stores by the end of the quarter, and is beginning to hit sites in Canada.

“We think with both of these, we are just beginning to scratch the service,” Hannasch said. “With regards to Lift, we are pleased with the early results and we are seeing a very good conversion rate — averaging over 8 percent of customer transactions incorporating some sort of Lift promotion.”

To extend its reach, the retailer is piloting home delivery in Texas with service from more than 160 stores in the Houston area. Customers can order a variety of items, including snacks, beverages and age-restricted items, and receive them in less than an hour.

“We are monitoring this closely to measure customer acceptance and how it can play out in other markets,” Hannasch said, adding that the company will pilot the service in different geographies with different partners in the coming quarters.

IN-STORE INITIATIVES

Inside the store, Couche-Tard continues to grow its offerings.

On the foodservice side, the retailer’s coffee-program expansion continues, with more than 9,000 coffee machines installed in almost 4,000 locations in the United States this year.

“We continue to see strong sales and margin results, and customer feedback has been extremely positive,” Hannasch said, noting that full installation is on track to be completed by the end of calendar year 2019. “It’s a great example of when we test, we find something that works and scale it rapidly.”

Packaged beverages remain an especially strong category, with energy drinks, water and ready-to-drink-coffee contributing notably to same-store sales growth.

Couche-Tard is also seeing emerging growth in the alcohol space with alternative products such as hard seltzers, reflecting changes in consumer behavior.

“We are committed to staying ahead of the curve,” the chief executive explained.

In its North American food program, the retailer launched a $1 hot dog promo that has delivered double-digit sales increases. Premium hot dogs are driving unit growth as Circle K converts more customers to its food program, according to Hannasch.

“Our Top Dog signature hot dog program is now in nearly 570 stores and we are preparing for a launch across all U.S. business units in the coming months,” he shared.

Moving to the backbar, Couche-Tard is seeing strength in alternative tobacco segments in the U.S. and Canada, and in markets in Europe where the company is allowed to launch such items.

“We also remain committed to traditional tobacco products, and this quarter we continue our significant expansion of backbars to more locations to not only display tobacco cigarettes, but make room for the tremendous amount of innovation we are seeing in the category,” Hannasch explained.

LEARNINGS FROM EUROPE

The customer experience both inside and outside the c-store is a priority for Couche-Tard and its Circle K network on both sides of the Atlantic Ocean.

“In Europe, we now have about 135 newly redesigned Circle K stores across eight different countries,” the CEO said. “[The work] is a complete redo of the site with attractive designs and food offerings that engage our customers.”

Feedback thus far has been very strong, according to Hannasch.

Couche-Tard also has found success with direct mailers and gamification engagement tactics in driving traffic in Europe. The company recently launched these efforts in Canada and plans to bring them to the U.S. later in the year.

“We have more tools than ever in the toolbox,” Hannasch said.

As of July 21, Couche-Tard’s network comprised 9,792 convenience stores throughout North America. Its North American network consists of 19 business units, including 15 in the U.S. covering 48 states and four in Canada covering all 10 provinces. In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to more than 1,300 locations in the United States.

In Europe, Couche-Tard operates 10 business units across Scandinavia, Ireland, Poland, the Baltics and Russia. As of July 21, Couche-Tard’s European network comprised 2,706 stores. In addition, under licensing agreements, approximately 2,250 stores are operated under the Circle K banner in 16 other countries and territories.

Originally published at Convenience Store News.


Couche-Tard closes cannabis retailer deal

Couche-Tard LogoAlimentation Couche-Tard Inc. officially entered the cannabis retailing sector with the closing of its investment in Fire & Flower Holdings Corp., an independent cannabis retailer.

Based in Edmonton, Alberta, Fire & Flower Holdings Corp. operates or licenses 23 cannabis retail stores in Alberta, Saskatchewan and Ontario; a wholesale distribution division in Saskatchewan; and the HiFyre digital retail platform.

Last month, Couche-Tard announced it would make a strategic investment in Fire & Flower, providing the latter with additional capital to further accelerate its expansion strategy.

Key points of the deal include:

  • Couche-Tard invested approximately $26 million in the form of unsecured convertible debentures to obtain a 9.9% ownership interest in Fire & Flower on a fully diluted basis.
  • Couche-Tard has also been issued common share purchase warrants that, if exercised in full, would subsequently increase its ownership interest to 50.1 percent on a fully diluted basis.

Following the closing of the transaction, Fire & Flower appointed Jeremy Bergeron to the company’s board of directors.

“Through this strategic investment, we reinforce our intention to become a key player in North America’s cannabis industry,” said Brian Hannasch, president and CEO of Couche-Tard. “We are excited to see what we can achieve together with Fire & Flower, as we further expand in Canada and look to leverage our presence in the United States and beyond.”

Additionally, the common shares in the capital of Fire & Flower commenced trading on the Toronto Stock Exchange as of Aug. 7.

“Combining Couche-Tard’s expertise in scaling retail stores with Fire & Flower’s retail experience and proprietary Hifyre digital platform positions our company extremely well to capitalize on new cannabis markets as they emerge,” commented Trevor Fencott, CEO, Fire & Flower.

Based in Laval, Couche-Tard’s worldwide total network includes more than 16,000 convenience stores, which primarily operate under the Circle K banner.

Originally published at Convenience Store News. 


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CrossAmerica exiting retail operations as Circle K takes over

Screen Shot 2019-08-13 at 3.04.52 PMCrossAmerica Partners LP is making good on its strategic initiatives, moving closer to exiting direct retail operations and according to President and CEO Gerardo Valencia, the company is confident about delivering on its goals for the future.

In May, CrossAmerica and Alimentation Couche-Tard Inc. completed the first in a series of asset swaps.

“We completed our first tranche of the asset exchange with Circle K on May 21 in which we received 60 sites,” Valencia said during CrossAmerica’s second-quarter earnings call on Aug. 6.

The sites are now under CrossAmerica’s wholesale fuel segment.

“We are now working on our second one and we have signed contracts with dealer for 65 additional sites. Most of which will be part of the second tranche of assets to be exchanged,” he explained.

According to the chief executive, the company is completing its final due diligence and expect to the transactions finalized before the end of the third quarter.

Based on the current timeline CrossAmerica expects the final assets to change hands by the first quarter of 2020.

As part of the overall exchange agreement, CrossAmerica will receive 192 company-operated convenience and retail fuel stores in the United States. Of the sites, 162 are fee-based and 30 are leased. The transaction is valued at $184.5 million, as Convenience Store News previously reported.

CrossAmerica’s general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of Couche-Tard.

For its part, Couche-Tard’s Circle K division will receive the real estate property for 56 U.S. company-operated convenience and retail fuel stores currently leased and operated by Couche-Tard/Circle K.

In addition, Circle K will receive 17 company-operated stores in the upper Midwest region of the U.S. Fourteen of the sites are fee-based and three are leased. All of the 17 sites are currently part of CrossAmerica’s retail segment.

Those assets also have an aggregate value of approximately $184.5 million.

In addition to the asset swap pact with Couche-Tard, CrossAmerica has been making progress on its rebranding efforts at the former Jet-Pep sites in Alabama. CrossAmerica acquired the sites in late 2017.

“Over half of the 90 sites have now been hard branded and reimagined through the Marathon brand, and we have changed dispensers in over half of the network,” Valencia said.

“As we improve the network quality, we’re seeing the benefits as we planned, optimizing the volume and profitability of the network, with an increase of 47%t over the first half of 2018,” he explained. “As we complete the work by the third quarter of the year, we expect further growth from these networks.”

In addition, as the second quarter was coming to a close, CrossAmerica entered into a master fuel supply and lease agreement with Applegreen plc. Under the terms of the agreement, Applegreen will run 46 company-operated retail stores in the Upper Midwest.

“We are very excited to expand our relationship with them. They are very strong operator and we expect to finish the year with over 100 sites by the end of 2019,” Valencia said.

Q2 FINANCIALS

In the second quarter, CrossAmerica reported $13.9 million in operating income and $6.4 million in net income. This compares to an operating loss of $1.6 million and a net loss of $6.9 million for the second quarter of 2018.

This resulted in adjusted EBITDA growth and strong distributable cash flow, Valencia noted. Specifically, adjusted EBITDA was $27.7 million and distributable cash flow was $22.3 million.

“As previously mentioned, we plan to exceed our direct retail operations to focus on working what we do best. We expect that as we do this, our adjusted EBITDA will actually grow as we generate efficiencies in this process,” he said.

In addition, CrossAmerica will continue to assess other opportunities whether that is third party acquisitions or current assets at Circle K, according to Valencia.

“All of these will continue to be with discipline to continue to deliver growth. We are growing and delivering on our plan,” he said.

Allentown-based CrossAmerica is a wholesale distributor of motor fuels and owner and lessee of real estate used in the retail distribution of motor fuels. Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded petroleum for motor vehicles in the United States and distributes fuel to approximately 1,300 locations and owns or leases nearly 1,000 sites. With a geographic footprint covering 31 states, the partnership has relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, CITGO, Marathon and Phillips 66.

Originally published at Convenience Store News. 


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Couche-Tard celebrates global Circle K rebranding accomplishments

Circle K Logo Sm_121317In September 2015, Alimentation Couche-Tard Inc. embarked on a journey to unite its vast convenience store network under one umbrella: a new global Circle K brand.

The move followed several acquisitions Couche-Tard made in Europe, including the retail assets of Statoil Fuel & Retail ASA in Norway, Topaz in Ireland and Shell in Denmark; as well as its purchase of The Pantry Inc., parent company of Kangaroo Express, in the southeast United States.

Now, three years in, the Laval-based retailer has reached a significant milestone in the journey, Couche-Tard President and CEO Brian Hannasch announced during the company’s fourth-quarter fiscal 2019 earnings call in July.

According to the chief executive, Couche-Tard “has made tremendous progress” this year expanding the global Circle K brand to more than 5,600 stores in North America and more than 2,000 stores in Europe.

“The most exciting benchmark this quarter was the finalization of the rebranding project in Europe, as Ireland is now complete,” Hannasch said, adding that “the march west” in the U.S. is proceeding at a rapid pace.

Approximately 98% of the company’s sites in its U.S. Rocky Mountain Business Unit and 550 stores — roughly 80% — in the Texas Business Unit are now sporting the new global Circle K brand.

Couche-Tard expects to finish the rebranding efforts in Texas, which are mostly CST sites, in fiscal 2020. In addition, the Grand Canyon Business Unit — previously the company’s Arizona Business Unit — is more than halfway completed.

“This ambitious rebranding strategy, which began about three and half years ago, continues to be a real win for our business,” Hannasch said. “With our key partners, we are now able to leverage national promotional campaigns and gain penetration in our private label products.

“For our customers, the aided and non-aided awareness across the globe has been outstanding,” he continued. “For our team members, there is now a foundation for our shared employee culture and pride in Circle K — which is probably the best payoff of all in this journey.”

CIRCLE K FUEL BRAND

In the fourth quarter of fiscal 2019, Couche-Tard also continued to grow its Circle K fuel brand. In Europe, the retailer is almost finished converting its Statoil, Topaz and Shell locations to the Circle K fuel brand. In the U.S., 900 sites were offering the brand by the end of the fiscal year.

“This unification of the Circle K brand inside our stores and at our fuel islands is contributing topline growth, and our easy pay ACH program — which gives customers a discount on fuel — is growing in penetration every day,” Hannasch noted.

As of April 28, Couche-Tard’s network comprised 9,866 convenience stores throughout North America, including 8,629 stores with fuel. Its North American network consists of 19 business units, including 15 in the United States covering 48 states and four in Canada covering all 10 provinces. In addition, through CrossAmerica Partners LP, Couche-Tard supplies road transportation fuel under various brands to approximately 1,300 locations in the U.S.

In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through 10 business units. As of April 28, Couche-Tard’s European network comprised 2,709 stores.

In addition, under licensing agreements, more than 2,150 stores are operated under the Circle K banner in 15 other countries and territories, which brings the worldwide total network to more than 16,000 stores.

 

Originally published at Convenience Store News. 


Fire & Flower Retail Stores (C) 2019 Fire & Flower Inc. (CNW Group/Fire & Flower Holdings Corp.)

Couche-Tard makes strategic cannabis move with investment in Fire & Flower

Fire & Flower Retail Stores (C) 2019 Fire & Flower Inc. (CNW Group/Fire & Flower Holdings Corp.)

Fire & Flower retail store. 

Convenience store chain operator Alimentation Couche-Tard Inc. has made a strategic investment in Fire & Flower Holdings Corp., which will use the funds to develop its Hifyre digital retail platform and expand its network of cannabis retail stores.

Couche-Tard’s initial investment in the Edmonton-based company, announced Wednesday, will give it rights to 9.9% of Fire & Flower’s equity and the potential to increase its stake to 50.1% for a total of $380 million.

“Couche-Tard is excited to make this strategic investment in one of the fastest growing cannabis ‘pure-play’ retailers,” the Quebec-based retailer’s president and CEO Brian Hannasch said in a statement.

“This investment in Fire & Flower, with a path to a controlling stake, will enable us to leverage their leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector.”

Fire & Flower currently operates or licenses 23 cannabis retail stores in Alberta, Saskatchewan and Ontario and a wholesale distribution division in Saskatchewan.

“This strategic investment by Couche-Tard, one of the world’s largest retailers, is transformative for Fire & Flower,” CEO Trevor Fencott said in a statement.

He added that Couche-Tard’s leadership team and international footprint in major markets such as the United States, Mexico and Europe “provide us with outstanding opportunities for aggressive growth.”

Alimentation Couche-Tard is one of North America’s largest operators of convenience stores and gas bars, primarily under the Circle K global brand and under the Couche-Tard banner in its home province of Quebec.

The companies say an indirect subsidiary of Couche-Tard will initially buy about $26 million of convertible debt securities that can be converted to 24.3 million common shares at a price of $1.07 each, representing 9.9% of equity.

At the same time, Couche-Tard will receive three series of warrants allowing it to purchase more shares. It will also get the right to top up its investment to maintain its ownership percentage.

Fire & Flower’s stock is currently listed on the TSX Venture Exchange but it has received conditional approval to list its shares on the Toronto Stock Exchange concurrent with the transaction.

Fire & Flower’s stock price jumped 20% to a two-month high at $1.37 a share following the announcement, while Couche-Tard stock was essentially flat at $80.73 in early trading Wednesday.