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Alimentation Couche-Tard: Convenience Store Stocks in the Spotlight

Supermarket aisle groceries retail
Image source: Getty Images

Written by Chris MacDonald at The Motley Fool Canada

Alimentation Couche-Tard (TSX:ATD) is a Canadian multinational convenience store operator. With approximately 14,300 stores across 24 nations, it offers several goods and services like road transportation fuel, charging stations for electric vehicles, food and beverages, etc.

Over the past few months, there have been several noteworthy activities by the company that have brought this stock to the spotlight. Let’s check them out.

Couche-Tard to purchase 112 gas stations in the U.S.

Last month, the Canadian convenience store giant has signed an agreement with MAPCO Express to buy 112 gas stations in the United States of America. A representative from Couche-Tard says that most of their acquired sites are in Georgia, Kentucky, Alabama, and Tennessee. Most of the real estate in these locations is owned and operated by MAPCO. Moreover, this deal will also include a logistics fleet and additional property.

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For investors looking at Couche-Tard as a growth stock, this deal further cements the company’s growth profile moving forward. A growth-by-acquisition company, many investors assess Couche-Tard on the ability of its management team to source deals. Thus, this is a positive development for investors, despite higher deal funding costs (the company is able to utilize its cash flows to cushion these costs well).

Acquisition of TotalEnergies’s European retail assets

An earlier deal in March is yet another reason why many investors remain bullish on Couche-Tard in terms of its growth profile. The company previously entered into an agreement with TotalEnergies to acquire 100% of the latter’s retail assets in the Netherlands and Germany. This deal will also include a 60% stake in the assets located in Luxembourg and Belgium.

As per company sources, this agreement will include 2,193 sites across Europe and its total value will be around €3.1 billion. The company plans to finance this acquisition via its existing cash reserves and credit facilities like the U.S. Commercial Paper Program, along with a term loan.

Alimentation Couche-Tard completes sale of 52 Atlantic Canada sites

Notably, Couche-Tard isn’t only in the business of acquiring gas stations and convenience stores. The company looks at its portfolio consistently and determines which assets should be let go.

Such has been the case earlier in March, when the company completed the sale of 52 of its Atlantic Canada sites to Harnois Énergies. This deal allowed the company to comply with the Competition Bureau’s demands and freed up cash, which was undoubtedly funneled into the aforementioned deals.

This deal also enabled the Canadian convenience store operator to complete the acquisition of the Wilsons network and add 120 dealer locations and 45 retail and fuel locations to the company’s assets. Furthermore, it includes a marine fuel terminal in Halifax.

With this addition, Alimentation Couche-Tard will be able to significantly scale its business. This will also enable the company to strengthen its network in the Atlantic Canada area.

Bottom line

Couche-Tard’s recent strong earnings results have driven investor interest in this name. However, it’s the company’s growth profile and business model which many investors like.

As far as long-term performance on the TSX is concerned, Couche-Tard remains one of the best Canadian stocks to own for the long term. Until something substantially changes with the company’s business model, this is a stock I think is worth owning for the long haul.

The post Alimentation Couche-Tard: Convenience Store Stocks in the Spotlight appeared first on The Motley Fool Canada.

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Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alimentation Couche-Tard. The Motley Fool has a disclosure policy.

2023