Couche-tard enters Asia with acquisition of Hong Kong C-store network
Alimentation Couche-Tard Inc., based in Laval, Québec, Canada, has entered into an agreement to acquire all the issued and outstanding shares of Convenience Retail Asia (BVI) Limited (Circle K HK) for HKD2.79 billion (USD360 million), on a fully diluted basis.
Couche-Tard is the leader in the Canadian convenience store industry. In the United States, it is the largest independent convenience store operator in terms of number of company-operated stores. In Europe, Couche-Tard is a leader in convenience store and road transportation fuel retail in the Scandinavian countries (Norway, Sweden and Denmark), in the Baltic countries (Estonia, Latvia and Lithuania), as well as in Ireland, and has an important presence in Poland. As of July 19, 2020, Couche-Tard’s European network comprised 2,714 stores, the majority of which offer road transportation fuel and convenience products while the others are unmanned automated fuel stations which only offer road transportation fuel. Couche-Tard also offers other products, including aviation fuel and energy for stationary engines.
Circle K HK, a subsidiary of Convenience Retail Asia Limited (CRA), operates a network of Circle K-licensed convenience stores, with 340 company-operated sites in Hong Kong and 33 franchised sites in Macau. This transaction represents a significant milestone for Couche-Tard as it provides the company with a platform in Asia from which to launch its regional growth ambitions.
Circle K HK currently holds the second largest market share in Hong Kong, one of the most economically developed markets in Asia and most densely populated regions in the world, with meaningful room to grow organically. Furthermore, Circle K HK has developed solid expertise in loyalty, with approximately 1.6 million “OK Stamp It” members, and has established a strong private label program, as well as advanced merchandising, technology and supply chain capabilities.
Over time, Couche-Tard expects to benefit from Circle K HK’s experienced management team to gain access to further opportunities in the Asia-Pacific region, while also leveraging the team’s insight and knowledge of the high-density urban retail format.
“I have followed Circle K Hong Kong’s progress closely for decades and deeply admire its leadership team and retail expertise. I look forward to welcoming their team members and stores into the Couche-Tard family and have no doubt that together we can reach millions more customers in Hong Kong and across Asia as we move forward in our journey to become the world’s preferred destination for convenience and fuel,” said Alain Bouchard, founder and executive chairman of Couche-Tard’s Board of Directors.
“Circle K Hong Kong is one of the best convenience store operators in Asia and will be an excellent fit within our company. We are excited to partner further with their highly advanced team in terms of innovation, loyalty, private label, retail execution and ability to grow market share. Upon closing of this transaction, Couche-Tard will reach a milestone in its strategic ambition of entering the high growth Asia-Pacific market with a first-rate management and operations team, which has the credibility, experience and capabilities to support future expansion in the region,” said Brian Hannasch, president and CEO of Couche-Tard.
Earlier, Couche-Tard had announced plans to purchase Caltex Australia, now Ampol, but had backed out of the deal in April 2020 due to the economic uncertainties created by the novel coronavirus pandemic. The transaction was valued at AUD8.8 billion (USD5.59 billion).
“Our current plan would be to re-engage the process once there is sufficient clarity as to the global outlook,” Hannasch said at the time.
Victor Fung, chairman of CRA., said that “The Board fully endorses the sale of Circle K Hong Kong to our long-term partner and franchisor. This is a win-win for both companies. Our investors will gain from a good return on their investment and Couche-Tard will benefit from a first-class organisation of dedicated and loyal team members who have contributed to the success of Circle K in Hong Kong.”
“We are very pleased to have reached this agreement with Couche-Tard. Having the brand owner directly involved in the business will create new opportunities for the brand and our staff. I am grateful to the management and employees of Circle K Hong Kong for their dedication over the past decades and am excited that they will be joining a multinational industry leader who shares our commitment to serving the local community,” Richard Yeung, CEO of CRA.
Under the terms of the agreement, Couche-Tard will acquire Circle K HK on a cash-free and debt-free basis. The final purchase price will be subject to working capital and other balance sheet adjustments. The transaction, which is expected to close by December 31, 2020, will be financed through available cash on hand and will be subject to usual closing conditions, including the approval by CRA shareholders, as well as regulatory clearances and customary conditions as specified in the purchase agreement.