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SAN ANTONIO — Alimentation Couche-Tard Inc. and 7-Eleven Inc. parent Seven & i Holdings Co. Ltd. have submitted offers to acquire CST Brands Inc., sources familiar with the situation told Reuters Thursday.
Couche-Tard, parent of the global Circle K brand, and 7-Eleven’s Japanese parent are not the only ones competing to purchase CST however. Private equity firms Blackstone Group LP and Apollo Global Management LLC have also placed bids to purchase the parent of Corner Stores, the news outlet reported.
CST plans to review at least one more round of offers before deciding whether to sell itself, Reuters added.
The amount being offered by each party to purchase CST was not revealed. CST shares rocketed higher Thursday afternoon on the New York Stock Exchange after the news was released, rising more than 18 percent to $45 per share. At this price, CST is valued at approximately $3.4 billion, and any winning bid would most likely command a premium to this market capitalization. Hence, a sale price could reach upwards of $4 billion or more.
All parties potentially involved in the bidding process either declined to comment or could not be reached for immediate comment when contacted by Reuters.
CST Brands has been undergoing an “exploration of strategic alternatives to further enhance shareholder value.”
“We believe there continues to be a disconnect between CST’s intrinsic value and the price of our common stock in public equity markets,” Kim Lubel, president and CEO of CST Brands, said on March 4. “For this reason, our board of directors is initiating a process to explore and evaluate a wide range of strategic alternatives to maximize value for our shareholders.”
On May 6, Lubel did not further comment on the strategic review, stating the process was still ongoing and takes time to complete.
Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, believes an outright sale of CST's business is the most likely outcome in the company's strategic review process.
Given there could be several suitors, "we expect a bidding war could ensue. We believe CST is a strategic asset that would be attractive to Couche-Tard, Seven & i, and potentially others. A key opportunity for a potential buyer would be to improve CST's merchandise performance both in [same-store sales] and margins, which could be accomplished by a best-in-class acquirer to drive operational improvements and synergies, in our view," she said.
San Antonio-based CST Brands Inc. operated 1,054 core U.S. retail c-stores as of March 31, with an additional 495 locations in Canada. It also had what it classified as 165 non-core U.S. retail stores as of March 31.