BUSINESS

Couche-Tard expanding European footprint with Shell deal as Q3 profits surge

03/17/2015 07:56 EDT | Updated 05/17/2015 05:12 EDT
MONTREAL - Alimentation Couche-Tard is pursuing growth on two continents after reaching agreement to expand its footprint in northern Europe as the convenience store operator's profits surged 36 per cent in the third quarter.

The Montreal-area company said Tuesday that it is buying Shell's retail, commercial and aviation fuels businesses in Denmark for an undisclosed price.

Couche-Tard (TSX:ATD.B) will almost double its presence in Denmark by acquiring 315 retail sites, including 225 full-service fuel stations, as well as an aviation business operating at seven Danish airports and a commercial fuels operation.

Analysts estimated the deal is worth up to US$600 million.

Chief executive Brian Hannasch said the Shell deal is the "next step forward" in Couche-Tard's commitment to use its 2012 acquisition of Statoil Fuel & Retail as a platform for growth in Europe.

Analysts expect the company will have other acquisition opportunities ahead as large oil and gas producers are beginning to sell assets in Europe, much like they did over the last decade in the U.S.

The agreement in Europe came a day after Couche-Tard completed its largest U.S. acquisition with the closing of a US$1.7-billion deal for The Pantry, with 1,500 locations in 13 states.

The company said the Shell deal is expected close in the second half of its 2016 financial year, which ends next spring.

The Quebec-based company, which reports in U.S. dollars, also said Tuesday that its profits increased to $248.1 million or 44 cents per diluted share in the third quarter on higher fuel margins and strong same-store merchandise sales in the United States.

That compared with $182.3 million or 32 cents per share a year ago. Revenue totalled $9.1 billion, down from $11.1 billion.

Excluding one-time items, including currency fluctuations and pension obligations, Couche-Tard said its adjusted profits soared to $289 million or 51 cents per share, from $175 million or 31 cents per share in the prior year.

Analyst Irene Nattel of RBC Capital Markets said the company's 2015 financial year is shaping up to be a good year for Couche-Tard with the acquisitions of The Pantry and Shell and "solid earnings."

"Net net a solid quarter and, with recent acquisitions, should enable share price momentum to remain intact," she wrote in a report.