Couche-Tard could add to empire with purchase of Kroger convenience stores

MONTREAL — Canadian convenience store chain Alimentation Couche Tard Inc. could be in the running to expand its growing global empire after grocery chain Kroger said it was considering selling its network of corner stores.

The Cincinnati, Ohio-based chain announced Wednesday its intention to explore “strategic alternatives” for its convenience store business, including a sale it said could attract “premium multiples.”

“Our convenience stores are strong, successful and growing with the potential to grow even more,” chief financial officer Mike Schlotman said in a news release.

“We want to look at all options to ensure this part of the business is meeting its full potential.”

Kroger’s convenience store business includes 784 locations across 18 states that employ 11,000 people operating under a series of banners. Kroger supermarket fuel centres are not included in the sale.

The chain generated US$4 billion in annual revenues in 2016, including from the sale of 1.2 billion gallons of fuel.

Irene Nattel of RBC Capital Markets said she would expect that Quebec-based Couche-Tard (TSX:ATD.B) will give careful consideration to a potential acquisition.

“While Couche-Tard is determined to grow in the U.S. and extend its long track record of successful acquisition activity, we expect the company to remain disciplined with respect to price,” she wrote in a report.

Couche-Tard couldn’t be immediately reached for comment.

Other potential bidders could be 7-Eleven and Casey’s General Stores.

Couche-Tard is still integrating its $3.4 billion acquisition in June of CST Brands, its largest to date.

Meanwhile, grocery chain Metro Inc. (TSX:MRU) announced Wednesday that it and a holding company subsidiary have entered into three agreements to sell most of its shares in Couche-Tard for $1.55 billion. The sales come about a week after Metro said it will take its time selling the Couche-Tard shares as it looks to finance its $4.5-billion purchase of the pharmacy chain Jean Coutu Group (TSX:PJC.A).

Metro Canada Holdings Inc. plans to sell 11.4 million Class A and B shares for $650 million to dealers led by National Bank Financial Inc. and BMO Capital Markets.

It will also sell in the next two days the same amount of shares to subsidiaries of the Caisse de depot et placements du Quebec.

Couche-Tard has also agreed to purchase 4.37 million shares from Metro for about $250 million.

Following the sales, Metro Holdings will own 5.1 million Class A multiple voting shares, representing 3.9 per cent of all Class A shares and about 0.9 per cent of all class A and B shares.

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