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Is Couche-Tard ready for another big purchase?

A dog named Roxy waits outside a Couche-Tard convenience store in Montreal, April 18, 2012.


Is Alimentation Couche-Tard Inc. ready for another big European acquisition?

No doubt the management at Couche-Tard would prefer to wait to integrate the big $2.9-billion purchase of Statoil's European gas station chain, which is currently underway, but chief executive Alain Bouchard and his team might not have that luxury. Couche-Tard has said Germany is at the top of its list for further growth in Europe, and a big chain of filling stations there is now on the market as Exxon Mobil looks at offloading its 1,100 gas stations there.

The plan all along was to use the purchase of Statoil's stations to create a basis for growth in Europe, but not likely so soon.

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Still, analyst Jim Durran of Barclays Capital says it would be a big job to do both deals, but Couche-Tard has the moxy.

"Although this opportunity may be viewed by some as 'too much too soon,' Couche-Tard's long standing successful track record of acquisition growth and experience with decentralized management would leave us supportive of the right 'strategic acquisition' at the right price, subject to further due diligence," he said in the note.

The one rub could be the fact that Exxon Mobil is not a strong player in Germany. Its network is the fourth-largest in the country, which has Europe's largest economy, but it has only about 7.5 per cent of the market.

The other issue, beyond where to find the time, is where to find the cash. The transaction could run to $1.3-billion and that would likely require Couche-Tard to tap equity markets to raise the cash to do it.

The other option would be to borrow more, putting the company's investment grade rating at risk, but as Mr. Durran notes, management has said that they are prepared to take that chance for the right deal.

Mr. Durran said an equity raise would be "prudent" and that investors would likely be willing to give up some near term upside in per-share earnings to keep the balance sheet strong.

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