Couche-Tard discreet about 7-Eleven in presenting its results

Alimentation Couche-Tard management remained discreet about its talks with the parent company of 7-Eleven convenience stores by revealing its financial performance for the start of the fiscal year on Wednesday after the markets closed.

The Laval-based company reported late in the day a 17% increase in sales to US$18.3 billion for the months of May, June and July. Adjusted earnings per share for the quarter came to US$83 cents, down 3.5% year-on-year.

Analysts had expected revenue of $17.9 billion and adjusted earnings per share of 84 cents, according to financial data firm Refinitiv.

Couche-Tard executives remain discreet and made no reference to the proposal made to Seven & i in the press release published Wednesday.

“The fragmented U.S. market offers significant opportunities for consolidation, and the challenging economic environment is accelerating this trend, creating attractive growth prospects for us,” CEO Brian Hannasch said.

“With our strong balance sheet and our usual financial discipline, we are optimistic about future transactions, offering a fair price and good compatibility,” he added.

Couche-Tard management had indicated on August 19 that it was working to reach a transaction that was mutually acceptable to both companies (Couche-Tard and Seven & i). “There is no guarantee at this stage that an agreement or transaction will be concluded,” the company stated.

Couche-Tard also added that it did not plan to issue any further public statements regarding its discussions with Seven & i “unless or until an agreement is reached.”

A deal with the operator of the 7-Eleven banner would have the potential to be the largest transaction in Couche-Tard’s history.

Alimentation Couche-Tard CEO Brian Hannasch, COO Alex Miller and CFO Filipe Da Silva will participate in a conference call with analysts Thursday morning to discuss the latest financial results. This is expected to be Hannasch’s last conference call as CEO, as his retirement was announced earlier this summer. Miller will succeed him as CEO on Friday.

Analysts will certainly be looking for comments or clarifications on Thursday surrounding the proposal made to Seven & i. The Japanese group has also not offered any additional information since its executives confirmed on August 19 that they had received a proposal from Couche-Tard to acquire all of Seven & i’s outstanding shares.

Couche-Tard shareholders are invited to a virtual annual meeting late Thursday morning after the conference call organized for analysts.

Alimentation Couche-Tard shares have lost 11% of their value since the confirmation last month of a friendly proposal sent to Seven & i.

“While the strategic logic appears sound, we have little visibility on how Couche-Tard could finance such a transaction, as the purchase price could reach C$54 billion, without taking into account existing debt,” said analyst Martin Landry of Stifel in a recent research report.

The uncertainty surrounding the proposed transaction with Seven & i could be a source of short-term concern for shareholders, according to this expert, which may help explain the recent volatility of Couche-Tard’s stock on the stock market.

Investors currently value Seven & i and its network of more than 85,000 stores at approximately C$50 billion. By comparison, the market values ​​Couche-Tard and its network of nearly 17,000 stores at approximately C$70 billion.

Seven & i is the leading convenience store operator in the United States with an estimated market share of nearly 10%. The company also holds a leading share of convenience stores in Japan.