CST to Merge with Circle K Owner

CST’s US brands include Corner Store.

SAN ANTONIO—Convenience store operator CST Brands Inc. said Monday it had reached a merger agreement with Quebec-based Alimentation Couche-Tard Inc., owner of the Circle K brand worldwide. The all-cash deal is valued at $4.4 billion, including the assumption of debt. Couche-Tard’s acquisition of CST for $48.53 per share represents a premium of about 42% to CST’s closing stock price on March 3, the day before the company’s board commenced an exploration of strategic alternatives. Prior to that, CST said it was exploring a sale-leaseback strategy to reduce its cost of capital while also funding future growth. “Our board believes that Couche-Tard is an ideal partner for CST,” says Kim Lubel, CST’s chairman, CEO and president. “With Couche-Tard, we will build upon an extensive and attractive convenience and fuel network with enhanced scale and global reach to best position the combined company for future growth.” Spun off from Valero Energy Corp. in May 2013, CST operates more than 2,000 stores across the US and Canada, including more than 600 in Texas. Its US brands include Corner Stores, Nice N Easy Grocery Shoppes and and Flash Foods. In addition, CST owns the general partnership of CrossAmerica Partners LP (CAPL), an Allentown, PA-based distributor of branded petroleum products that owns or leases more than 800 of the 1,200 sites to which it distributes motor fuels. “We look forward to welcoming CST and CAPL to the Couche-Tard family,” says Brian Hannasch, Couche-Tard’s president and CEO. “CST is an excellent company and is well positioned in the southwestern United States with an important presence in Texas, Georgia, New York and Eastern Canada. With this transaction we would strategically strengthen our positioning in both the Sun Belt and the East Coast of North America.” Couche-Tard is a leader in the Canadian c-store industry and is also the largest in the US in terms of company-owned stores. Its North American portfolio ran to 7,888 stores as of April 24, including 6,490 locations that pump gasoline. When the CST acquisition is completed, Circle K will establish a new business unit in San Antonio with shared services operations. The deal is expected to close in early 2017. BofA Merrill Lynch is serving as lead financial advisor and J.P. Morgan Chase is also serving as financial advisor to CST, while Wachtell, Lipton, Rosen & Katz and Stikeman Elliott are acting as its legal advisors. For Couche-Tard, Morgan Stanley and National Bank Financial served as financial advisors; Faegre Baker Daniels LLP and Davies Ward Phillips & Vineberg are acting as legal advisors.