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After a Failed Takeover Bid, Is This Top TSX Stock a Buy?

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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.

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Fool contributor Cindy Dye has no position in any of the stocks mentioned. The Motley Fool recommends ALIMENTATION COUCHE-TARD INC.

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