The decision of Suncor Energy Inc. of yielding to investor pressure and investigating the sale of its gas stations has put the focus on a potential buyer: Alimentation Couche-Tard Inc of Quebec.
The acquisition owner of the Circle K chain has been looking for a major acquisition and tried, unsuccessfully, to take over the French grocery chain Carrefour SA last year. Suncor said Monday it will consider options for its downstream assets, which include more than 1,500 Petro-Canada locations, making it one of the largest convenience and retail fuel chain chains in the country.
Petro-Canada would be a major deal for most buyers, with a price some analysts estimate at more than $ 10 billion. For Couche-Tard, it would probably come with significant antitrust obstacles.
The Laval, Quebec-based company operates about 2,100 stores across Canada and about 1,200 have gas stations. There is a lot of overlap with Petro-Canada, especially in the eastern part of the country.
“I think Couche-Tard would have a hard time buying the whole network. There would be competition issues, concentration issues,” Ryan Bushell, president of Newhaven Asset Management Inc., told BNN Bloomberg Television.
Parkland Corp., a smaller Canadian fuel retailer, has also been in acquisition mode, but with a market value of $ 5.2 billion, Petro-Canada would be a “big bite,” Bushell said. “I’ll be interested to see if a third player comes out, or maybe an international player.”
Suncor closed 1.1 percent in Toronto on Monday after rising as much as 5 percent. Couche-Tard was down 1.9% while Parkland was up 3%.
Couche-Tard and Parkland officials declined to comment.
Martin Landry, an analyst at Stifel GMP, believes that large retailers like EG Group Ltd. or the parent company of 7-Eleven Inc. they might have some interest. Petro-Canada stations “are of high quality and are well maintained and located,” he said, adding that he estimates the valuation “approximately” between $ 10,000 and $ 14 billion.
If Couche-Tard wanted to buy the business, it would probably have to divest 50 percent of gas stations for antitrust reasons, according to Landry.
“FIRE SALE”
Credit Suisse analyst Manav Gupta set the value of the division at $ 9.6 billion to $ 11.2 billion, according to an estimate that it could earn $ 800 million before interest, taxes, depreciation and amortization in a normalized manner.
Others questioned whether a sale in response to an Elliott Investment Management LP activist push will generate a high price.
“Do you really need to fire this thing when everyone knows you’ve ventilated all your clothes?” said Rafi Tahmazian, a partner and senior portfolio manager at Canoe Financial in Calgary, who continues to hold “a small position” at Suncor.
“I would like a good explanation from them about why there is so much hatred towards an asset when it doesn’t seem like the right time to do it yourself,” Tahmazian said, adding that energy markets are volatile at the moment. and the company would be better off waiting for a clear direction before looking for a buyer.
“Major gas stations have already been sold in the last six years or so,” said Phil Skolnick, an analyst at Eight Capital. He believes Elliott’s estimate that the business could be worth 14 times Ebitda is too rich, given a limited group of buyers and the possibility of fuel prices dropping from current levels.