Topaz owner Couche-Tard in $4bn US buy

Canada’s Couche-Tard has agreed to buy the forecourt chain CST Brands for almost $4bn (€3.5bn), using its biggest-ever acquisition to expand its foothold in Texas and eastern Canada.

The company entered the Irish market by buying Topaz fuel stations here late last year.

Couche-Tard completed purchasing Topaz’s 444 Irish outlets, which included Esso forecourts, in February. It subsequently bought Shell’s downstream retail business in Denmark.

Its offer for CST is about $4.4bn including debt. It represents a 42% premium over CST’s closing price last March, before that company sparked takeover speculation by saying it would explore strategic alternatives.

The deal brings Couche-Tard thousands of locations in the south-eastern US, Texas and New York, as well as eastern Canada, part of a push to use mergers to expand.

This is the chain’s fourth acquisition announcement this year and the largest in its 36-year history. It eclipses the 2012 purchase of Statoil Fuel for about $2.8bn, which established a foothold in Europe.

“With this transaction we would strategically strengthen our positioning in both the Sun Beltand the east coast of north America,” said Brian Hannasch, chief executive officer of Couche-Tard.

To finance the deal, Couche-Tard will draw on available cash and a new term loan, as well as existing credit lines.

Couche-Tard also announced a separate deal to sell some of CST’s Canadian assets to Parkland Fuel for about $750m after the initial transaction closes.

That number of stores included in that deal will depend on the outcome of a review by Canada’s Competition Bureau.

Couche-Tard shares were almost 8% higher yesterday at one stage, and have risen 10% this year.

The deal will generate pretax costs savings of $150m to $200m within two to three years of its completion, Couche-Tard said in a presentation on its website.

It will boost earnings in the first year, as well as increasing profit 40c to 50c a share a year by the third year.

Adjusted net debt to earnings before interest, taxes, depreciation, amortisation and rent will rise to 3.5 times after closing of the CST deal, Couche-Tard said.

The ratio will drop to 3.1 times after the first year following the close, and to 1.4 times after the fifth year, Couche-Tard predicts.