The parent company of Ultramar is reportedly looking to sell its fuel stations and convenience stores in the United States and Canada.
Analyst Peter Sklar of BMO Capital Markets estimated Valero's (NYSE:VLO) retail network could fetch US$3.5 billion to US$4 billion, a price likely too rich for Couche-Tard.
Sklar suggested the Quebec-based company could only raise up to US$1.9 billion in new debt without hurting its credit rating and would have to substantially dilute its share base if it partially funded it by issuing new shares.
"In the event that Valero decides to auction its retail business in smaller, regional prices rather than as a whole, we believe that Couche-Tard could then potentially become an acquirer," he wrote in a report.
Couche-Tard has said it wants to reduce its debt from buying Scandinavia's Statoil Fuel & Retail earlier this year for $2.9 billion. However, it continues to look for acquisition opportunities and recently completed some small deals in Florida and Washington State.
Valero had almost 1,000 company-operated stores in the U.S. and about 380 in Eastern Canada under the Ultramar brand as of December.
Irene Nattel of RBC Capital Markets said it's not clear that Valero will ultimately sell the retail operations.
"Apparently, it is more advantageous from a tax perspective to spin it out to shareholders," she said in an email.
That's exactly what oil giant Statoil did with its retail operations before they were ultimately sold to Couche-Tard.
Acquisitions past and future are expected to be discussed on Friday when Couche-Tard meets shareholders at its first annual meeting since acquiring Statoil Fuel & Retail.
The chain operates more than 6,000 stores in North America under the Couche-Tard and Mac's banners in Canada and the Circle K name in the United States.
The company also has 2,300 Statoil Fuel & Retail locations in Europe.
On the Toronto Stock Exchange, Couche-Tard's shares lost 45 cents at C$45.05 in afternoon trading.