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Couche-Tard chairman says Bay Street investors blocking founders’ control

The variety store, Couche-Tard seen in Montreal, November 19, 2013. (Christinne Muschi for The Globe and Mail)

Christinne Muschi/The Globe and Mail

The future of Canadian convenience store giant Alimentation Couche-Tard Inc. was thrown into doubt after executive chairman Alain Bouchard said the company's billionaire founders will not seek another shareholder vote on extending their control of the chain.

Mr. Bouchard even evoked the possibility of selling the company should it appear clear that he and Couche-Tard's three other founders are not able to retain the special rights that give them control of the retailer through multiple-voting shares. Quebec lawmakers, meanwhile, pledged their support for Couche-Tard's founding entrepreneurs and vowed to work with them to maintain the company's head office in the province.

"It's investors in Toronto that are blocking" our effort to keep a grip on Couche-Tard, Mr. Bouchard told Montreal's La Presse newspaper without mentioning names. "I've talked to governance people from Toronto. They're standing high on their pedestal and they're lecturing us. I don't have time to waste with those types of people. I'm a bit fatalist, but if this forces the sale of Couche-Tard, so be it."

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The comments expose a rift between Quebec Inc., which is highly sensitive about takeovers of its homegrown companies, and Bay Street, which Mr. Bouchard said opposes his effort to keep control of the Laval, Que.-based multinational. They also provide a contrast with what happened at Fairfax Financial Holdings Inc., whose shareholders recently agreed to preserve the voting power of founder Prem Watsa's multiple-voting shares for the next decade.

"This is an immense concern," Mr. Bouchard said. "I don't really know what we, the founders, will decide. It's such an enormous problem that I try not to think about it."

At the centre of Mr. Bouchard's anxiety is Couche-Tard's so-called sunset clause. Hatched in 1995 when Mr. Bouchard and the other founders were in their 30s and 40s, it stipulates that their voting rights – by which they control the company through a special class of shares with 10 votes each despite collectively owning just 22.7 per cent of the equity – would end when the youngest of them turns 65 or dies.

At the time, the expiry date must have seemed so far off that it wasn't a concern for the founders. Nor did it seem to bother shareholders. The stock has increased in value by 650 times since its 1986 initial public offering and eightfold in the past five years, making anyone who invested in the company early on a fortune. Founders Mr. Bouchard, Richard Fortin, Réal Plourde and Jacques D'Amours are worth a combined $7.8-billion.

Now, with all but one of the men older than 65 and the youngest, Mr. D'Amours, reaching that threshold in December, 2021, it's left Couche-Tard, a company with a $33-billion market value, in a peculiar position: If Mr. D'Amours passes away, the founders lose control . In five years' time, they'll lose control anyway.

That's why Mr. Bouchard negotiated amendments to Couche-Tard's articles of association last year with a special committee of directors. In short, they proposed to nix the automatic termination of the company's dual-class share structure so the founders could continue to exert voting control with their Class A shares. Shareholders were asked to vote on a proposal to maintain the dual-class shares until the last of the four steps down from the board.

Couche-Tard withdrew the proposal after concluding it did not have the two-thirds support necessary from Class B subordinate shareholders to pass. At the company's annual meeting last September, a visibly dejected Mr. Bouchard expressed shock that investors rejected the idea given the stellar returns on investment generated by the four founders. Proxy advisers Institutional Shareholder Services and Glass Lewis & Co. recommended shareholders vote against the plan.

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Lacking time to mount a proper campaign for the proposal last year, Mr. Bouchard had said he might call for another vote on the matter. Now it appears he won't.

"Based on the discussions I've had, I don't feel like going back to investors," he told La Presse. "There's a blockage in Toronto." He called the original decision to put a sunset clause in place "a mistake."

A member of Couche-Tard's 11-member board, who spoke on condition of anonymity, said such a state of affairs, with the founders' continued control being disallowed, is unfair given what occurred at Fairfax. "That angered me," the director said. "It's a double standard."

Couche-Tard's largest shareholders include the Caisse de dépôt et placement du Québec, investment management firm Capital Group Cos. Inc. and Royal Bank of Canada, according to Bloomberg data. As of Jan. 31 this year, the company operated a network of nearly 8,000 convenience stores in North America and roughly 2,200 in Europe.

Mr. Bouchard declined to speak to The Globe and Mail Wednesday. Couche-Tard spokeswoman Karen Romer said Mr. Bouchard has nothing more to say now.

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