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Couche-Tard raises synergy target for CST acquisition

Canada-based convenience store operator Alimentation Couche-Tard Inc. raised its synergy target for its acquisition of CST Brands as the company said it has had "solid progress" reversing negative sales trends at the convenience and fuel chain.

Couche-Tard boosted the synergy target to $215 million from $150 million for the three years following the transaction, the company's President, CEO and Director Brian Hannasch said in a conference call with analysts March 20 following the release of fiscal third-quarter earnings. Those synergies will come primarily from improvements in fuel and merchandise distribution and supply costs, he said in the call.

Couche-Tard said it completed its $4.4 billion acquisition of CST Brands Inc. on June 28, 2017. During the call, Hannasch said the chain was experiencing negative merchandise and fuel sales trends prior to the acquisition.

The company has already completed the rebranding of all CST Canada sites to the Couche-Tard Brand, Hannasch said.

"The layouts of the stores have been transformed into the Couche-Tard floor plans, and our private-label brands have been introduced completing the integration of these sites," Hannasch said. "This is having a very nice positive impact."

As of Feb. 4, the annual synergies run rate for the CST acquisition reached about $103 million, according to the company's earnings release.

During the call, Claude Tessier, Couche-Tard's CFO, said the company expects synergies from the acquisition of U.S.-based Holiday Stationstores Inc., which closed in the fiscal third quarter ended Feb. 4, to run at a range from $50 million to $60 million over the next three to four years.

"These synergies will come primarily from reductions in operating and administrative costs, from improvement in fuel and merchandise distribution and supply cost as well from retail pricing optimization," he said during the call.