Couche-Tard buys more than 2,000 gas stations in Europe for $4.5 billion

Convenience store operator Couche-Tard will be able to expand its footprint in Germany, Belgium, the Netherlands and Luxembourg.

Food Couche-Tard is acquiring 2,193 TotalEnergies service stations in Europe, for the equivalent of approximately 4.5 billion Canadian dollars, the Laval company announced on Thursday.

< p class="e-p">With this transaction, the operator of convenience stores and gas stations expands its footprint in Europe, where it already has nearly 3,100 stores. The agreement will allow it to break into new territories in Germany, Belgium, the Netherlands and Luxembourg. The company took its first steps overseas with the acquisition of Norwegian retailer Statoil in 2012.

Total's assets are a good base to grow Couche-Tard's European network, believes its president and CEO, Brian Hannasch. Total's network is very well positioned with significant size and market share in the four countries, he underlines in an interview. We have visited hundreds of their establishments and they are good operators. They have a good consumer offer.

In its presentation to shareholders, the company estimates that it will be able to generate 120 million euros (nearly C$175 million) in synergy over a period of three years with this acquisition, the closing of which is scheduled for the end of calendar year 2023.

Mr. Hannasch replies that it is still early to identify the improvements that can be made by combining what Couche-Tard and Total do well.

He gives the example of the food segment, which generates more sales at Couche-Tard. About 25% of our sales in Scandinavia come from food. It's significantly smaller at Total. We will quickly pilot some of our concepts and adapt them to local taste and culture.

The leader believes that Total's service stations stand out thanks to their car wash offer. Their expertise could help Couche-Tard make the experience even more enjoyable for motorists. I find them excellent in the car wash. They really did a good job.

RBC Capital Markets analyst Irene Natel believes the transaction has all the features Couche-Tard typically seeks. She mentions strategic interest, geographical complementarity and an attractive valuation.

“The euro is also devalued, which suggests upside potential if exchange rates normalize. »

— Irene Natel, an analyst at RBC Capital Markets

Couche-Tard said the acquisition price of 3.1 billion euros, l' equivalent of 4.5 billion Canadian dollars, represented a valuation of eight times earnings before interest, taxes, depreciation and amortization of the coveted assets.

On the energy crisis in Europe, Hannasch says the situation is much better than six months ago. In November, the executive said that the company had taken several steps to reduce its energy consumption in the wake of the energy crisis caused by the war in Ukraine.

L& Milder winter has reduced the pressure on the energy market.

“We have seen a significant reduction in energy costs, I would say in the last six to eight weeks. We're getting close to normal. »

— Brian Hannasch, President and CEO of Alimentation Couche‑Tard

Lower energy prices will have had an impact on fuel margins, however in Europe in the third quarter (ended Jan. 29), according to results the company disclosed a dozen hours before the transaction.

Fuel margins decreased by 2.82 US cents per liter in Europe to 8.01 US cents. The company attributes this underperformance to an unfavorable exchange rate for the euro and volatility in the fuel market.

During a conference with analysts, Hannasch said lower oil prices have had an effect on margins as the supply chain has more stages in Europe. The impact of inventory depreciation has more impact in Europe. It shows.

Despite an 8% increase in sales to US$20 billion, the company's net profit fell 1.2% to US$737.4 million.

Adjusted earnings per share were 74 cents US, compared to 70 cents US for the same period last year.

Before publication of earnings, analysts had expected earnings of 79 cents per share and revenue of US$20.1 billion, according to financial data firm Refinitiv.

In addition to fuel in Europe, Desjardins Capital Markets analyst Chris Li attributes the earnings-to-expectation gap to margins at U.S. convenience stores and higher fuel-related expenses. ;inflation. Overall, we believe these headwinds are transitory.

Couche-Tard stock gained 1.31 cents CA, or 2.15%, at 62.25 Canadian dollars on the Toronto Stock Exchange, Thursday around noon.