Couche-Tard’s acquisition of Convenience Retail Asia (BVI) Limited (Circle K HK) is only a “first step in a long journey” in the region, said Brian Hannasch, its CEO, in an interview with The Press.
Posted on November 5, 2020 at 2:50 p.m.
Antoine Trussart
Press
With this purchase valued at C $ 470 million announced Wednesday, Couche-Tard becomes the owner of 340 Circle K stores in Hong Kong in addition to being responsible for 33 franchise stores in Macau.
“We buy in order to be able to have a base and develop in Hong Kong and other countries in Asia. It is the same strategy that we applied in Europe and the United States ”, specifies Alain Bouchard, founder and executive chairman of the board.
The acquisition of Circle K HK therefore transforms the franchised stores into Couche-Tard properties. The 33 branches in Macau remain franchised, as Circle K HK had the right to franchise store development to other companies which remain independent. Couche-Tard plans to open “dozens” of convenience stores in Hong Kong itself, following a development plan put in place by the former owners, according to Mr. Bouchard.
Since 2012, Couche-Tard has already been present in the Asian market through many Circle K franchise stores in Vietnam, Cambodia, Indonesia and Mongolia, but it did not directly operate establishments in this corner of the planet. . Brian Hannasch says he wants to break into the markets of China, Thailand and Laos, in addition to strengthening their presence in current markets.
A Desjardins Capital analysis sees the transaction favorably, not for its financial impact, but for its strategic importance. “We expect that Alimentation Couche-Tard will use Circle K HK to seek access to new opportunities in the Asia Pacific region,” said analysts Chris Li and Jim Huang.
The markets are also welcoming the news as the value of Alimentation Couche-Tard (ATD-B) shares climbed 5.5% on Thursday on the Toronto Stock Exchange.
The transaction confirms a change in orientation of Couche-Tard’s activities towards stores in downtown areas. “It’s a formula that allows stores to open more quickly,” says Bouchard. While the deadlines vary between two and five years for a construction project in the suburbs or along the highway, opening a new branch in an existing premises in the city only takes a few months.
This new strategy is reinforced by a possible drop in the prices of commercial premises in city centers, whether in North America or Asia. “If we see the right corners emerge, we will take advantage. The context is unfortunate, but if we manage to fill the space and offer services to our customers, it is an opportunity for us ”affirms Mr. Hannasch.
Heavy political context
Despite the busy political context and strained relations between Canada and China, Mr. Bouchard is “very comfortable” settling in Hong Kong. “We have done a lot of work over the past year, particularly with the Canadian authorities and the Quebec House in Asia,” he explains.
“Even though there have been a lot of political protests, stores have performed very well with growth of 5.9% last year and 5.7% this year. Convenience stores also have the label of performing well in difficult economic situations, ”adds Claude Tessier, Chief Financial Officer.
No new talks with Ampol
Even though the company still wants to break into the Australian market, Hannasch says talks have not resumed with Ampol (formerly Caltex) over a new bid to acquire its 2,000 gas stations.
Caltex turned down an initial offer to buy C $ 7.8 billion last February. Couche-Tard then put its acquisition project on hold last April because of the difficult context accompanying the global pandemic.
Objective: to double in size by 2023
Couche-Tard still plans to double in size by 2023, according to its CEO Mr. Hannasch. Some of this growth will have to be organic, but the rest will have to come through acquisitions. “It will take some, but we will not rush this portion of the plan,” says Bouchard. There is something in the works. I don’t know when, but I am very confident. “
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