Analyst Puts Sale of CST at 70% Probability

NEW YORK — The likelihood that CST Brands Inc. will be sold is as high as 70 percent, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities LLC.

Over the last few months, the San Antonio-based convenience store operator has outperformed the market in share value, based on the March announcement that its board of directors initiated a strategic review process that included hiring advisors, Herzog wrote in Wells Fargo's latest Equity Research report.

"We believe there is a high probability that a deal gets done," she stated, citing ongoing consolidation within the c-store industry as a factor in the prediction.

Herzog's analysis suggests an acquisition for $53 to $56 per share could be justified by a number of strategic buyers.

Her report also suggests that potential buyers of CST include:

• Alimentation Couche-Tard, based on its active strategy of mergers and acquisitions within the United States and CST's ability to fill a geographic gap;
• Seven & i Holdings, parent company of 7-Eleven, which recently acquired 76 CST stores in the West;
• Marathon Petroleum Corp., parent of Speedway, which recently increased its position at retail;
• Lawson Inc., Japan's second-largest c-store chain, which is seeking to expand international operations;
• TravelCenters of America, which is more likely to acquire a portion of CST's network; and 
• Financial sponsors/private equity firms.

Several of these companies have already been rumored to be potential buyers, as CSNews Online previously reported.

CST Brands Inc. operates approximately 2,000 locations throughout the southwestern United States, Georgia, Florida, New York and eastern Canada.