A Couche-Tard convenience store is shown in Montreal in this file photo.Graham Hughes/The Canadian Press
Canadian convenience-store operator Alimentation Couche-Tard Inc. ATD-T has struck a deal to buy more than 2,000 service stations in the heart of Europe from French oil giant TotalEnergies SE, extending its footprint on the continent ahead of a looming shift in driving and consumption habits.
Couche-Tard has made a binding offer to buy 2,193 stations for €3.1-billion in cash (about US$3.3-billion at current exchange rates) and started negotiations to finalize a transaction, the Laval, Que.-based company said in a joint statement Thursday with TotalEnergies TTE-N. If finalized, the deal would be the Canadian company’s first major acquisition in more than five years.
Under the proposed agreement, Couche-Tard would take over all of TotalEnergies’ retail assets in Germany and the Netherlands, and take a 60-per-cent controlling interest in its Belgium and Luxembourg retail assets. The Canadian company would run the sites in all four countries with TotalEnergies acting as a silent partner in its minority holdings, Couche-Tard chief executive Brian Hannasch said in an interview.
Ten years after first expanding into Europe, Couche-Tard has “gotten very comfortable” doing business there, Mr. Hannasch said. The new acquisition allows the company to push further out into some of the continent’s strongest economies, he added.
“As you think about making a very strong network even stronger – and more future-fit for energy transition and other things happening – we see an opportunity to take share with customers in these markets,” he said.
Traditional gas stations are changing, as drivers switch to electric vehicles in increasing numbers. The shift is expected to increase the importance of food and services – such as car washes – to attracting customers, who will have time to kill as they wait for their batteries to recharge, or may not need to visit service stations at all if they opt to recharge at home or at work.
The change is happening more quickly in Europe than it is in North America. Analysts from market data firm Statista estimate there will be 997 electric vehicles sold per 100,000 people in the European Union by 2026, compared with 556 in the United States.
Mr. Hannasch and Couche-Tard executive chairman Alain Bouchard have been hunting for a major takeover since a plan to buy French grocer Carrefour SA fell apart in early 2021 over opposition from the French government. They began working on a deal with TotalEnergies around the same time, Mr. Hannasch said.
The Canadian company, which operates most of its stores under the Circle K brand, first entered Europe in 2012, with the purchase of Norway’s Statoil Fuel and Retail for US$2.6-billion. It now has about 2,700 retail sites in Scandinavia, Ireland, Poland and the Baltic nations.
Adding a presence in the four new countries would boost its store count to 4,900 in Europe and increase its addressable market there to 185 million people, from 70 million. TotalEnergies’ 566 stores in Belgium have the top market share among service stations in the country, while its 45 Luxembourg locations are No. 2 there. Its 1,195 stores in Germany and 387 in the Netherlands hold a fourth-place share in each country.
The rationale for merging with Carrefour wasn’t immediately apparent to many investors. But taking over TotalEnergies’ stores in Central Europe appears to fit squarely with the company’s expertise as a seller of food and convenience-store merchandise.
Couche-Tard is getting sites in key locations, but with 30 per cent to 40 per cent lower in-store sales on average than stores in its existing European network, offering it a major opportunity to boost that part of the business, Mr. Hannasch said. Selling sausages to Germans is unlikely to be a stretch.
The company will bring its approach as a retailer to the new business, obsessing over things such as product placement, promotions and communicating with customers, Mr. Hannasch added.
“This transaction has all the hallmarks of a Couche-Tard deal,” RBC Capital Markets analyst Irene Nattel said in a research note, adding that it is strategically compelling, geographically complementary and attractive in terms of valuation. Couche-Tard is paying a multiple of eight times operating profits, based on the stores’ 2022 results.
Founded by Mr. Bouchard and three friends, Couche-Tard has ballooned in size from a regional convenience-store chain to a global titan through acquisitions and organic growth. It hasn’t made a major purchase since buying Texas-based CST Brands for US$4.4-billion in 2017.
Couche-Tard has turned its Norway operations into a laboratory for the electric-vehicle age. The company has for years been trying to figure out how best to profit from widespread EV adoption in that country, the world’s highest. It has experimented with different in-store offerings, loyalty programs and even with selling home EV chargers.
Meanwhile, TotalEnergies has been divesting service stations as it works toward a goal of reducing its petroleum product sales by 30 per cent by 2030. Since 2015, the company has sold off retail locations in Italy, Switzerland and Britain.
The competitive environment for deals has changed as higher interest rates have limited the ability of some buyers to access capital, and that will benefit Couche-Tard as valuations come down, Mr. Hannasch said in a separate interview in August. “When you look at who’s been competing with us over the last four or five years, it’s been people that are using the high yield markets and private equity partnerships. And those are largely sidelined today,” he said.
Couche-Tard has analyzed several major takeover opportunities in recent years, but balked at the prices. The retailer has made some of its best acquisitions in times of economic distress, when capital markets weren’t available to all buyers, Mr. Hannasch has said.
Couche-Tard plans to fund this latest deal with available cash, along with existing credit facilities and new debt. The company will continue to hunt for other takeover opportunities and would be able to raise between US$9-billion and US$10-billion of debt for another deal without having to issue equity, chief financial officer Claude Tessier told The Globe and Mail.
The TotalEnergies deal needs the approval of regulation authorities, and the companies also need to consult employee representative groups in Europe. Those employee groups can’t veto the transaction, but they need to be on board for it to work, Mr. Hannasch said. If it’s accepted, the deal should be finalized before the end of the year.