It was a big step forward for Canadian convenience store chain Alimentation Couche-Tard (TSE:ATD) now has access to Seven & i’s books ahead of a potential acquisition of its North American operations. The deal, of course, came with some protective measures, but still clearly advances the notion that 7-Eleven stores in North America will soon have new ownership. That did little for Couche-Tard shares, though, as they slumped over 1.5% in Thursday morning’s trading.
The deal between Alimentation Couche-Tard and Seven & i has been in the works for months now, and it advances, but very slowly. Some might say “deliberately” instead, and that might be a more charitable way to put it, but gaining it is. A new non-disclosure agreement was reportedly signed between the two, and though the terms of it will remain confidential as well, we do know that it contains a “standstill” clause.
The “standstill” clause is designed to protect against a hostile takeover. A standstill clause prevents companies from taking certain actions, particularly in the event that an agreement cannot be reached on a friendly takeover bid. With Couche-Tard preparing to spend up to $47 billion—the largest ever price paid for a Japanese company by a foreign buyer, reports noted—it is a safe bet that some agreement could be reached.
Phoenix Gets One More Option for Burritos
Meanwhile, down in Phoenix, Arizona, the Circle K stores in that area will be getting a new option: Burrito Express locations. Couche-Tard looks to add six Fast and Fresh restaurants to its lineup. Given that Couche-Tard has over 150 locations in Phoenix, adding just six sounds more like a test balloon than any kind of serious play.
Still, given that Burrito Express already has seven independent restaurants going in Phoenix, it was likely a safe bet that Burrito Express was not especially interested in adding a lot more locations than those six to the Phoenix area. It will also serve to bolster Couche-Tard’s fresh food options in the area, and potentially serve as a template for other Circle K stores elsewhere.
Is Alimentation Couche-Tard Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on TSE:ATD stock based on 12 Buys assigned in the past three months, as indicated by the graphic below. After a 4.59% loss in its share price over the past year, the average TSE:ATD price target of C$85.75 per share implies 21.15% upside potential.
