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File photo of Alain Bouchard, the chief executive officer of Alimentation Couche-Tard Inc.


Convenience store giant Alimentation Couche-Tard Inc. has delivered the blockbuster deal that investors have been anticipating for the better part of a decade.

The Laval, Que.-based company struck an agreement to buy the retail unit of Statoil ASA , Norway's state-owned oil giant, for $2.8-billion, laying out an ambitious plan that will shift the company's future growth focus to Europe.

"For us, it's a big day ... a very important day," Couche-Tard president and chief executive officer Alain Bouchard said during a conference call from Oslo. Investors thought so too, sending the widely-traded B shares up more than 15 per to an all-time record of $39.60 on the Toronto Stock Exchange.

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Some analysts expect the deal will boost Couche-Tard's per-share earnings by nearly 20 per cent next year.

The deal will see Couche-Tard, which has over 5,800 stores in Canada and U.S. under the Mac's, Couche-Tard and Circle K brands, purchase Statoil Fuel & Retail ASA, which operates a network of 2,300 gas stations in six Scandinavian and Baltic nations, as well as Poland.

If the deal goes through, Couche-Tard will become one of the six largest Canadian-based companies by sales – combined, the two companies would have posted $34.5-billion in revenue last year – with combined operating earnings of $1.3-billion. The company is financing the purchase with bank debt.

Statoil Fuel has more than a 30 per cent share of convenience store sales in Norway, Sweden, Denmark, Latvia and Estonia and is in the top five in both Lithuania and Poland. It had $12.8-billion in sales in 2011.

"This is a very strong asset we're buying," chief financial officer Raymond Paré told analysts on a conference call.

The takeover deal also takes Couche-Tard into a part of Europe that has held up relatively well as economic turmoil has ravaged other countries on the continent.

"The fact they are spread over multiple countries in Europe [that are in better economic health]and that they are market leaders in most countries in which they operate is quite reassuring," said GMP Securities analyst Martin Landry.

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Now, freed from the control of an oil major, Mr. Bouchard said the acquired company will be able to buy gas stations from other large oil companies that are looking to focus their capital resources on finding and refining fuel.

Statoil Fuel "was not the best positioned company to buy assets from Shell, BP or Esso, as [it]was quite identified as being part of Statoil," he said. Now that it will be part of Couche-Tard, "a real focused operator only at retail, it means that these big major oil companies will start to talk to us about their divestment in Europe that we are interested in," he said.

The Statoil purchase is be the largest in Couche-Tard's history and is the fourth major deal to transform the company, which started with a single depanneur in Laval 32 years ago and has been managed by the same tight-knit group of operators led by Mr. Bouchard since then.

"This was just a little guy in Quebec who was trying to grow, and he was going up against the big guys," said Alan Radlo, chief investment officer with Cambridge Advisors and a long time investor in Couche-Tard.

Couche-Tard emerged as a major player in Quebec in the 1990s after swallowing up other regional chains. In 1999 it went national by buying Mac's owner Silcorp Ltd. In 2003, it purchased Circle K Corp. from oil giant ConocoPhillips Co. for $1.1-billion, adding more than 2,200 corporate, licensed and franchised stores in 16 U.S. states.

Along the way, Couche-Tard brought new life to a dull, dusty and highly fragmented business dominated by mom-and-pop shops.

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Couche-Tard brought sophisticated merchandising and marketing know-how, aggressively eliminating "dust-collectors" from store shelves. It added better store designs and inventory management and introduced fresher foods and fast-food service counters.

As the company grew, Mr. Bouchard also kept it highly decentralized. For years, the head office, which has just 20 employees, was located in an anonymous unmarked office building in Laval, across from a string of car dealerships and above a nightclub.

Mr. Bouchard indicated Couche-Tard would follow the same game plan it has applied to a long string of successful past acquisitions. The Statoil stores have room to improve, as sales inside the stores have been declining for the past three years.

But Couche-Tard executives repeatedly praised the existing management team, which they plan to leave in place to lead the European division.




Many Canadian retailers have tried to expand in foreign countries, but fewer have succeeded:

Canadian Tire

In 1982, the company scooped up the ailing Texas-based home and auto supply chain White Stores Inc., but failed to turn the brand around. By the time Canadian Tire sold the assets in 1986, its U.S. experiment had racked up about $250-million in losses.

In 1991, Canadian Tire ventured south again, this time launching an auto parts and service chain called Auto Source Inc. in Ohio, Indiana and Kentucky. But it was again unable to compete in the cutthroat U.S. market, and eventually mothballed the chain in 1994 after losing more than $60-million.

Lululemon Athletica

The Vancouver-based yoga-wear retailer expanded rapidly in the United States after it went public in 2007, operating 106 of its 165 stores south of the border as of the end of last October, 45 in Canada and 14 in Australia. The chain generates a striking $2,000 sales per square foot overall, although analysts say sales are not quite as high in the more crowded U.S. market.

Mark's Work Wearhouse

The Calgary-based work and casual wear chain entered the U.S. market in 1981 and peaked at nine stores. The U.S. operation ran into difficulties and filed for bankruptcy six years later.

Shoppers Drug Mart

Canada's largest pharmacy chain already had nearly 40 franchise stores in Florida when, in 1984, then-parent company Imasco Ltd. purchased Virginia-based Peoples Drug Stores Inc., with nearly 800 company-owned stores spanning 14 states. Over the next two years, Shoppers got caught in a heated discount-drug war against its larger U.S. competitors. The chain downsized and slashed costs but, by 1989, Imasco gave up on its U.S. venture and sold the remaining outlets.

La Senza

In 2005, the lingerie retailer shut its five U.S. stores after about two years in the market, the victim of tight competition and disappointing results. Almost two years later, it was taken over by the U.S. parent of rival Victoria's Secret.

Marina Strauss

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