After having unsuccessfully attempted to make major acquisitions over the past three years, Couche-Tard has just pulled off the big deal that many have been waiting for for a long time by getting their hands on the group’s European network of 2,200 convenience stores and service stations. French TotalEnergies.
For Couche-Tard, this is therefore a big transaction, and we will come back to this, but it is also a daring bet when we know that Europe has just passed a law which will ban the sale of petrol and diesel cars throughout its territory from 2035.
This is also one of the reasons why TotalEnergies, which is notably an oil giant, wants to leave the retail sector.
The French group anticipates an imminent decline in this activity and plans to reduce its sales of petroleum products by 30% by 2030 in order to stop selling or refining more fuels than it produces oil.
In the explanations that TotalEnergies gave on Thursday to explain the reasons which led its group to accept Couche-Tard’s offer, we can read in full that the group’s networks will be affected by the ban on thermal vehicles.
The group’s retail networks will be “faced with a loss of fuel-related income, while electric vehicles will be recharged mainly at home and at work and not at stations”, notes TotalEnergies. We therefore do not see a bright future for the 2,200 retail businesses that belonged to the group.
And that is also why the president of TotalEnergies wanted a merger with Couche-Tard, which has become a master in the valuation of the daily operations of its 14,000 local shops. We hope that the recognized expertise of the Quebec group will ensure the sustainability of the TotalEnergies stores.
The fact remains that with this transaction Couche-Tard is deepening its carbon footprint, while TotalEnergies – an oil producer, I remind you – is trying to reduce it.
At Couche-Tard, we are also preparing for the energy transition and the compulsory transition to electric cars, particularly in Norway, where 80% of new vehicles sold are electric.
As the daily reported last weekend The Globe and MailCouche-Tard is testing its new store models in Norway in which people will stop to recharge their vehicle and spend more time in the convenience store than at a simple stop at the pump.
This is also why Couche-Tard now presents itself more as a group active in mobility and is gradually abandoning its traditional image of service station operator.
Back in the acquisition market
As my colleague Richard Dufour reminds us, we have to go back to 2016 to find the last major transaction carried out by the Couche-Tard Group, when it acquired the network of 1,300 CST Brands service stations in UNITED STATES.
Since this US$4.4 billion transaction, the Quebec group has experienced a series of failures in its attempts to pursue its expansion through acquisition, a strategy which has made its reputation and which has enabled it to establish itself as one of the world’s largest players in the convenience store sector.
In November 2019, Couche-Tard launched a takeover bid for Caltex Group, which operates the largest chain of gas stations and convenience stores in Australia. This takeover of 7.7 billion for the purchase of 2000 service stations would have been the largest in the history of Couche-Tard.
This offer was rejected before being improved and finally abandoned in April 2020 due to the general uncertainty caused by the sudden outbreak of the COVID-19 pandemic.
A few months later, Couche-Tard unsuccessfully sought to acquire the chain of 3,900 Speedway service stations in the United States, this time offering to pay 18 billion US, but was beaten by the Japanese consortium Seven & i Holdings, which offered 21 billion to win the bet.
In January 2021, Couche-Tard returned to the charge and, to everyone’s surprise, attempted a big coup by seeking to acquire French grocery chain Carrefour in a deal worth more than 25 billion. An attempt at rapprochement which quickly aborted when the French government objected to it inadmissible without the possibility of appeal…
Two years later, Couche-Tard therefore returns to woo a French giant, TotalEnergies, but in a transaction that is not likely to upset the political authorities of France, increasing its chances of success accordingly.
When compared to the prices Couche-Tard was willing to pay to buy Caltex’s 2,000 stations in Australia or Speedway’s 3,900 in the United States, the price of 4.5 billion for the 2,200 gas stations and convenience stores of TotalEnergies seems to take into account the expected drop in traffic at gas pumps.
Couche-Tard’s leaders know how to count and they will want to quickly demonstrate the accuracy of their calculation.