Alimentation Couche-Tard Inc. announced that it has entered into an agreement to acquire all the issued and outstanding shares, on a fully diluted basis, of Circle K HK, a subsidiary of Convenience Retail Asia Limited (CRA) for approximately $360 million.
Circle K HK 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,” said Alain Bouchard, Founder and Executive Chairman of Couche-Tard’s Board of Directors. “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.”
“Circle K Hong Kong is one of the best convenience store operators in Asia and will be an excellent fit within our company,” said Brian Hannasch, President and CEO of Couche-Tard. “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.”
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 Dec. 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.
“We are very pleased to have reached this agreement with Couche-Tard,” said Richard Yeung, CEO of CRA. “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.”
Canadian-based Couche-Tard is the largest independent convenience store operator in the U.S. in terms of the number of company-operated stores. As of July 19, Couche-Tard’s network comprised 9,274 convenience stores throughout North America, including 8,088 stores with road transportation fuel dispensing. Its North American network consists of 18 business units, including 14 in the U.S., covering 47 states, and four in Canada, covering all 10 provinces. Approximately 109,000 people are employed throughout its network and at its service offices in North America.
In Europe, Couche-Tard operates a broad retail network across Scandinavia, Ireland, Poland, the Baltics and Russia through 10 business units. As of July 19, 2020, Couche-Tard’s 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. Including employees at branded franchise stores, approximately 22,000 people work in its retail network, terminals and service offices across Europe.
In addition, under licensing agreements, close to 2,350 stores are operated under the Circle K banner in 15 other countries and territories (Cambodia, Egypt, Guam, Guatemala, Honduras, Hong Kong, Indonesia, Jamaica, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam), which brings the worldwide total network to close to 14,350 stores.