Earlier this week, I wrote an article about the proposed takeover of Speedway gas stations and convenience stores by Alimentation Couche-Tard (TSX:ATD.B). Speedway is owned by Marathon Petroleum and comprises more than 3,900 locations.
Couche-Tard was interested in teaming with a partner to take on some of the Speedway gas stations and address potential antitrust concerns. Besides Couche-Tard, rival bids were being considered by Seven & i Holdings and the private equity firm TDR Capital.
Couche-Tard’s bid is rejected
It has now been reported that Couche-Tard’s bid was not accepted.
Instead, 7-Eleven, a subsidiary of Japan’s Seven & i Holdings, signed an all-cash deal to purchase the Speedway gas stations network for $21 billion.
The agreement, which has been approved by the boards of both 7-Eleven and Marathon, will result in after-tax proceeds of approximately $16.5 billion. The money will be used to pay down Marathon’s existing debt.
The deal is expected to close in the first quarter of 2021 and includes a 15-year fuel supply agreement. Marathon, the largest U.S. refiner by volume, noted that the supply agreement amounts to nearly 7.7 billion gallons per year.
Couche-Tard stock is one of best performing on the TSX
Couche-Tard is one of the best-performing stocks on the TSX, with a 10-year CAGR of 30%. Trading at $46.44 as of this writing, shares are up significantly from $30.40, the 52-week low.
One of the reasons to like Couche-Tard stock is its resilience during economic downturns. Despite the effects of the COVID-19 lockdowns, Couche-Tard’s net income nearly doubled in the fourth quarter of 2020.
In the company’s recent fourth-quarter earnings release, Couche-Tard reported net income of US$576.3 million. The income grew from US$289 million in the same quarter a year earlier. Earnings are expected to grow at an annual rate of 6.5% over the next five years.
Couche-Tard is looking to grow its footprint
Couche-Tard’s bid to take over Speedway shows the company is looking for ways to expand its footprint.
With over 15,000 stores across several continents, Couche-Tard is one of the world’s largest operators of convenience stores.
However, with 7-Eleven’s takeover of Speedway, 7-Eleven’s North American holdings will dwarf those of Couche-Tard. The takeover will increase 7-Eleven’s store count to approximately 14,000 locations in the United States and Canada.
Compare that number to Couche-Tard, with close to 7,300 U.S. stores located in 48 states. The stores are primarily operated under the Corner Store, Circle K, and Holiday banners.
In Canada, Couche-Tard operates a network of over 2,100 stores across the country from the Maritimes to Western Canada. These businesses operate primarily under the Couche-Tard, Circle K, and Mac’s brands.
The bottom line
Alimentation Couche-Tard is a great company for long-term investors. The stock has been one of the most reliable stocks on the TSX and has returned approximately 1,300% to shareholders over the past decade.
With the latest earnings release, the company has shown it can thrive during turbulent times. Couche-Tard has proven to approach strategic acquisitions aggressively. And the company ended the quarter in a strong financial position with more than $4.7 billion in liquidity.
