Alimentation Couche-Tard (OTCMKTS:ANCUF) Raised to Outperform at BMO Capital Markets

Andrew Cummings
November 28, 2019

The company said its board is now considering the proposal, including obtaining advice from its financial and legal advisers.

The unsolicited purchase offer for Sydney-based Caltex Australia Ltd. - its second this year - would allow the Quebec-based retailer to expand beyond North America and Europe as it aims to double the company's size.

Caltex said in an announcement today that it was planning to spin off a 49 per cent interest in 250 freehold sites into a listed property trust was not related to the Couche-Tard's proposal. "With Caltex, we see a potential opportunity to leverage our leading global position in the convenience retail market".

Caltex decided at the start of the year to buy out all of its fuel franchisees by 2020, but admitted in August it was still learning from its convenience retail strategy said it would sell 50 of its 790 company owned and operated petrol stations, deciding they were worth more as alternative developments.

The proposal for AU$34.50 per share is for the redemption of all Caltex shares outstanding.

Caltex shares jumped 13.4% to close at their highest level in 15 months to A$33.79, but remained below the proposed price.

The proposal also includes the payment of certain dividends to shareholders at the time of the eventual takeover.

The 01-Year Return of the company Alimentation Couche-Tard Inc Cl B Sv 0.31%, while the revenue growth percent over five years is 1.14%.

The offer is in the hands of the board of directors of Caltex to review and is subject to due diligence and customary terms and conditions, including approval by Couche-Tard's board of directors. The brokerage now has $49.00 target price on the stock.

Caltex is a transport fuel supplier, with a network of approximately 2,000 company-owned or affiliated sites across Australia.

Net income attributable to the company rose to $578.6 million, or 51 cents per share, in the second quarter ended October 13 from $473.1 million, or 42 cents per share, a year earlier. The retailer benefited from a 27.7 per cent boost in USA fuel margins even though fuel revenues dipped almost eight per cent. The company operates its convenience store and road transportation fuel retailing chain under various banners, including Circle K, Couche-Tard, Holiday, Ingo, Mac's, Re.Store, and Topaz.

Merchandise same-store sales grew 3.2 per cent in the US, 2.1 per cent in Canada and 3.3 per cent in Europe.

If the deal goes ahead, it would mark Couche-Tard's first foray into Australia, and its largest deal, according to Refinitiv data.

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