You are here
SAN ANTONIO — Alimentation Couche-Tard Inc. is acquiring CST Brands Inc. in a $4.4-billion deal. The merger agreement announced Monday morning brings an end to months of speculation about the future of locally based CST.
The price tag equals $48.53 per share in cash. In all, the transaction value represents a premium of approximately 42 percent to CST's closing stock price on March 3, the last date prior to CST announcing that its board of directors began exploring strategic alternatives to further enhance stockholder value.
The transaction also represents a premium of approximately 61 percent since May 1, 2013, the last date prior to regular way trading of CST following the company's spin off from Valero Energy Corp.
Couche-Tard will, through its acquisition, also acquire CST's interest in CrossAmerica Partners LP and associated incentive distribution rights.
Laval, Quebec-based Couche-Tard is a global leader in the convenience and fuel retail industry, with a strong Circle K brand across the United States. Together, Couche-Tard and CST will join on the journey to become the world's preferred destination for convenience and fuel, according to CST.
"After the board's comprehensive review of strategic alternatives to enhance stockholder value, we are pleased to reach this agreement with Couche-Tard, which we expect to provide immediate and compelling value to our stockholders," said Kim Lubel, chairman, CEO and president of CST.
"Our board believes that Couche-Tard is an ideal partner for CST. With Couche-Tard, we will build upon an extensive and attractive convenience and fuel network with enhanced scale and global reach to best position the combined company for future growth," she added. "Importantly, our employees will benefit from new opportunities for career development as part of a larger, global company. We look forward to working closely with Couche-Tard to seamlessly complete the transaction and ensure a smooth integration."
Upon completion of the transaction, Circle K will establish a new business unit in San Antonio with attached shared services operations.
Couche-Tard expects to finance the all-cash transaction with available cash, its existing credit facilities and a new term loan. The transaction is currently expected to close in early 2017, subject to the approval of CST's stockholders and regulatory approvals in the U.S. and Canada.
Couche-Tard has also entered into an agreement with Parkland Fuel Corp. to sell certain Canadian assets of CST after the merger for approximately $750 million. The assets include CST's cardlock business, CST's dealer and commission agents business, CST's commercial and home energy business, a number of company-operated stores to be determined following the Competition Bureau of Canada's review of the transaction and CST's Montréal corporate head office.
This transaction is subject to customary regulatory approval and closing conditions. Couche-Tard intends to use the proceeds from this sale to repay part of its credit facilities.
"We look forward to welcoming CST and CrossAmerica to the Couche-Tard family," said Brian Hannasch, Couche-Tard's president and CEO. "CST is an excellent company and is well positioned in the Southwestern United States with an important presence in Texas, Georgia, in the U.S. Southeast Region, New York and Eastern Canada. With this transaction we would strategically strengthen our positioning in both the 'sun belt' and the east coast of North America. Our teams are looking forward to meeting CST customers and welcoming them into the Couche-Tard family."
He added Couche-Tard is "excited to share best practices with CST as well as to combine the capabilities of CST's team with Couche-Tard's, to enhance value for our stockholders. We strongly believe that our all- cash offer is a compelling one for CST's stockholders, giving them the opportunity to realize full and immediate value for their investment."
Faegre Baker Daniels LLP and Davies Ward Phillips & Vineberg are acting as legal advisors to Couche-Tard. Morgan Stanley & Co. LLC and National Bank Financial advised Couche-Tard in connection with the transaction.
BofA Merrill Lynch is serving as lead financial advisor and J.P. Morgan Chase is also serving as financial advisor to CST. Wachtell, Lipton, Rosen & Katz and Stikeman Elliott are acting as legal advisors to CST.
"I have always thought that in our industry 'size matters', whether that be for purchasing, logistics, best practices or for becoming famous for our product categories," said Alain Bouchard, founder and executive chairman of the board of directors, Couche-Tard. "The addition of CST's exceptional people and its strategic assets takes us one step further towards all these goals. I look forward to welcoming the CST and CrossAmerica teams onboard into our growing company."
Network by the Numbers
Once closed, Couche-Tard will significantly expand its retail network.
As of April 24, Couche-Tard's network comprised 7,888 convenience stores throughout North America, including 6,490 fuel stores. Its North American network consists of 15 business units, including 11 in the United States covering 41 states and four in Canada covering all 10 provinces. Approximately 80,000 people are employed throughout its network and at its service offices in North America.
In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics States and Russia through 10 business units. As of April 24, its network is comprised of 2,659 stores. Including employees at its branded franchise stores, approximately 25,000 people work in its retail network, terminals and service offices across Europe.
In addition, under licensing agreements, almost 1,500 stores are operated under the Circle K banner in 13 other countries and territories worldwide (China, Costa Rica, Egypt, Guam, Honduras, Hong Kong, Indonesia, Macau, Malaysia, Mexico, the Philippines, the United Arab Emirates and Vietnam), which brings the total network to more than 12,000 stores.
CST employs more than 14,000 team members at more than 2,000 locations throughout the Southwestern United States, Georgia, Florida, New York and Eastern Canada. Its U.S. banners are Corner Stores, Nice N Easy Grocery Shoppes, and Flash Foods. In Canada, CST is the exclusive provider of Ultramar fuel and its Dépanneur du Coin and Corner Stores.
CST also controls the general partner of CrossAmerica Partners LP, owns 100 percent of its Incentive distribution rights and holds a significant equity investment in it. CrossAmerica distributes branded and unbranded road transportation fuel to more than 1,100 locations in the U.S.