LAVAL, Quebec — Alimentation Couche-Tard Inc. is taking on a new market: Asia.
The company is making the move through an agreement to acquire all the issued and outstanding shares, on a fully diluted basis, of Convenience Retail Asia Limited (Circle K HK) for approximately $360 million. Circle K HK, a subsidiary of Convenience Retail Asia Limited (CRA), operates a network of Circle K-licensed convenience stores, with 340 company-operated sites in Hong Kong and 33 franchised sites in Macau.
According to Couche-Tard, the transaction gives it a platform in Asia to launch its regional growth ambitions.
“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 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, Couche-Tard said in a release announcing the deal.
Circle K HK has also 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, it added.
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.
“Circle K Hong Kong is one of the best convenience store operators in Asia and will be an excellent fit within our company. 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,” said Brian Hannasch, president and CEO of Couche-Tard.
“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,” he added.
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, 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.
“The board fully endorses the sale of Circle K Hong Kong to our long-term partner and franchisor. This is a win-win for both companies. Our investors will gain from a good return on their investment and Couche-Tard will benefit from a first-class organization of dedicated and loyal team members who have contributed to the success of Circle K in Hong Kong,” said Victor Fung, chairman of CRA.
As of July 19, Laval-based Couche-Tard’s network comprised 9,274 c-stores throughout North America. Its North American network consists of 18 business units, including 14 in the United States covering 47 states and four in Canada covering all 10 provinces.
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, Couche-Tard’s network comprised 2,714 stores.
In addition, under licensing agreements, close to 2,350 stores are operated under the Circle K banner in 15 other countries and territories, which brings the worldwide total network to close to 14,350 stores.
CRA, a member of Fung Retailing Group, is principally engaged in the operation of Circle K c-stores, Saint Honore cake shops and Zoff eyewear chain in Southern China, including Hong Kong, Macau and Guangzhou. As at June 30, the group operates a total of 373 Circle K stores in Southern China. Together with the Saint Honore chain, which currently has a total of 125 stores in Hong Kong, Macau and Guangzhou, and 11 Zoff eyewear stores in Hong Kong, the Group operates a total network of 509 outlets.