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Alimentation Couche-Tard highlights liquidity, capacity for more deals

Alimentation Couche-Tard Inc. is open to striking more deals, its executives said March 20, a move that could further consolidate the convenience store market in North America.

President and CEO Brian Hannasch said Couche-Tard will have the flexibility to pursue more acquisitions, though he added that the company is looking for deals that will be accretive and that involve "the right management teams." Hannasch spoke during a call to discuss the company's quarterly results.

The company's adjusted leverage ratio was 2.38 at the end of the third quarter. Couche-Tard has completed multiple acquisitions in North America in recent quarters, including the June 2017 purchase of CST Brands Inc., part of a deal that added roughly 1,300 locations to Couche-Tard's network. The company also acquired 522 stores in its December 2017 purchase of Holiday Stationstores Inc.

"We bring a unique scale to a very fragmented industry," Hannasch said. "At this point, I think there are very few opportunities we don't think we can handle with our existing facilities."

Asked later during the call about the timing of future dividend payments and share buybacks, Hannasch said the company would not commit to a rigid timeline "given our ambition in our strategy and our continued M&A ambition." The company raised its third-quarter dividend 2.5 Canadian cents to 12.5 Canadian cents and said it plans to buy back 4% of its class B shares, according to a summary of quarterly results.

Couche-Tard paid down its revolving unsecured operating credit by about $1.2 billion during the company's third quarter ended Feb. 3, CFO Claude Tessier told analysts, adding that Couche-Tard has $690.2 million in cash and could access up to $2.3 billion through its revolving credit facilities.

"Our liquidity position remains strong," Tessier said.

More deals would be just one of a series of changes at Couche-Tard. The Laval, Québec-based company is in the midst of a rebranding, replacing various banners with its Circle K brand. In North America, Couche-Tard extended the Circle K brand to 250 locations during the third quarter.

The rebranding has allowed Couche-Tard to roll out its private-label merchandise to new markets, as well as run promotions on branded items more efficiently, Hannasch said.

"The key learning is that I should have done it a decade ago," the CEO said.

At the same time, Couche-Tard has been revamping its merchandise offerings, including offering more ready-to-eat prepared foods. The company is expanding its menu items, adding burritos and nachos from a pilot in Europe to other parts of the world, for example, Hannasch told analysts.

The company also plans to start selling vaping products from Juul Labs Inc. in several European countries, Hannasch said. The company has been selling Juul products in the U.S. for about two years and began selling them in Canada in January.