Couche-Tard Nears Deal to Buy CST

Circle K owner Alimentation Couche-Tard Inc. is nearing a deal to buy CST Brands Inc. in a big move to consolidate the convenience-store industry.

Couche-Tard is the likely winner of an auction of CST, according to people familiar with the matter. It isn't clear what the Canadian company would pay, but CST has a market value of $3.4 billion, meaning a deal is likely to be valued around that level or higher.

A transaction could be announced as soon as this week, one of the people added—though as always, a deal may not be reached or another of the bidders that has been vying for CST could prevail.

CST is a fuel and convenience-store chain that operates predominantly under the Corner Store name, with more than 1,000 stores in the southwestern U.S. as well as in New York and Eastern Canada. It was spun off from Valero Energy Corp. in 2013. Earlier this year, the San Antonio company announced it had hired bankers to explore strategic options amid pressure from activist shareholders.

Last year, CST had $11.4 billion in revenue. It is the second-largest publicly traded fuel and convenience retailer in North America, the company says.

CST shares were little changed Monday at $44.32. The stock is up 13% this year, fueled in part by hopes of a sale.

Engine Capital LP in December called on CST to explore options, saying it could attract a buyer at $50 to $55 a share. The activist investor criticized CST's management and its costs compared with those of rivals like Couche-Tard. In March, Engine and a second activist, JCP Investment Management, struck a deal to add two new directors to the board amid the strategic review.

Then in May, CST agreed to sell around 80 stores in California and Wyoming to 7-Eleven Inc. for $408 million.

Couche-Tard has been a consolidator in the convenience-store sector, seeking to combine complementary operations and eliminate overlapping costs. Last year, the company bought American chain Pantry Inc. for about $860 million.

Couche-Tard has a market value of more than 34 billion Canadian dollars ($26 billion). It operates convenience stores in Canada, the U.S. and Europe under the Couche-Tard, Kangaroo Express, Topaz, Ingo and Circle K brands.

Write to Dana Mattioli at [e-mail], Dana Cimilluca at [e-mail] and Ben Dummett at [e-mail]

(END) Dow Jones Newswires

August 15, 2016 22:25 ET (02:25 GMT)

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