Couche-Tard’s purchase of US express car wash operator True Blue signals the Laval company’s intention to consolidate the car wash industry.
The acquisition of True Blue Car Wash for an unspecified sum marks Couche-Tard’s first foray into the independent car wash industry, a $10 billion industry in North America, says analyst Martin Landry , from Stifel GMP.
Founded just six years ago, True Blue operates 65 express car wash stations in Arizona, Texas, Illinois and Indiana. The stations are operated under the Clean Freak brand in the American Southwest and under the Rainstorm brand in the Midwest.
“This is a great opportunity to extend our brands to a very attractive industry sub-category in a way that complements our convenience and mobility product offerings,” commented Couche-Tard’s CEO. , Brian Hannasch.
“This acquisition will support Couche-Tard’s future growth in this segment,” said Couche-Tard’s Chief Financial Officer, Claude Tessier.
True Blue’s stations are considered a natural extension of Couche-Tard’s current car wash network, which has some 2,500 locations.
With more than 85% of True Blue’s locations located within five kilometers of a Couche-Tard-owned convenience store, management believes the transaction provides significant geographic overlap to support road traffic offerings between True Blue’s locations. and Couche-Tard’s Circle K convenience stores.
Couche-Tard management believes True Blue is well positioned to continue growing in a “very fragmented” and growing industry, more than 60% made up of operators with one or two locations.
True Blue could thus become the platform for initiating the consolidation of the car wash industry, thinks Martin Landry.
However, Couche-Tard is not the only company sensing opportunities and able to act as a consolidator. Mister Car Wash, whose shares are listed on the New York Stock Exchange, and Driven Brands Holdings, whose stock is traded on NASDAQ, are two important players in the industry. These two companies are already much larger in size than True Blue.
In the case of Mister Car Wash, Martin Landry points out that this company has 420 locations and generates gross margins of more than 30%.
This expert does not expect Couche-Tard to add gas pumps or a convenience store at True Blue stations. “I like the automated car wash model because in addition to generating higher profit margins, it seems to grow faster and doesn’t require as many employees. »
True Blue’s stations have approximately 170,000 subscriber members, accounting for more than half of revenue. Martin Landry notes that the price of subscriptions varies between $20 and $50 per month and that these subscriptions make it possible to generate recurring revenue, but also to limit the seasonality effect.
The action of Alimentation Couche-Tard fell 2% Thursday to close at $60.19 on the Toronto Stock Exchange.