Next Stop for Couche-Tard?

Talk of sale of ExxonMobil's Esso chain in Germany harkens back to Statoil strategy

Published in CSP Daily News

By
Greg Lindenberg, Online Editor

LAVAL, Quebec -- Exxon Mobil Corp. is weighing a sale of its German Esso gas station chain, sources told Bloomberg on Wednesday. The unit, which includes more than 1,100 stations, could fetch more than one billion euros ($1.3 billion U.S.), people familiar with the process told the news agency. The possibility puts the stations on the European chessboard recently dominated by Canadian retail giant Alimentation Couche-Tard Inc., which just wrapped up its purchase of Norwegian c-store/gasoline chain Statoil. In April, Couche-Tard tagged Germany as a possible next stop on its acquisition train.

( Click here for previous CSP Daily News coverage of Couche-Tard's acquisition of Statoil.)

Houston-based ExxonMobil is in preliminary talks with multiple parties, two or three of which may be from Russia or eastern Europe, the sources told Bloomberg. No final decision on a sale has been made, they said.

Exxon Mobil Central Europe Holding GmbH, the Hamburg-based holding company that includes the German business, had 2011 sales of 12.8 billion euros ($15.9 billion U.S.) and operating profit before taxes and interest of 856 million euros $($1.06 billion U.S.), according to its website. The business includes oil, natural gas and refineries as well as the retail network.

An ExxonMobil Central Europe spokesperson, Gabriele Radke, declined to comment to Bloomberg on any possible process.

Germany, the United Kingdom and the Benelux countries--Belgium, the Netherlands and Luxembourg--are next on the list as oil producers such as Royal Dutch Shell PLC and Exxon Mobil Corp. divest retail assets over time, Couche-Tard CFO Raymond Pare said earlier this year, according to a report by The Montreal Gazette (see Related Content below for previous coverage).

"Germany is clearly on our radar and at the top of the list," Pare told the newspaper then, adding the nation's market is as solid as Scandinavia. "We did assess basically almost all the networks in these countries. We know pretty well what we want and what we don't want."

Couche-Tard did not respond by press time to a CSP Daily News request for comment on the possibility.

Analysts at Barclays Capital said that Couche-Tard's next European target could potentially be ExxonMobil's stations in Germany, added a report by The Financial Post.

There is one big obstacle facing Couche-Tard if it does go after the ExxonMobil properties, the newspaper said. The pursuit of Statoil has left Couche-Tard highly leveraged, considering the price tag on the German properties. But previous statements from Couche-Tard suggest a deal would still be possible, said the report.

"They [Couche-Tard] have limited borrowing capacity without risking the loss of their investment grade rating, which they have indicated they are prepared to do for the right opportunity," Barclays' analysts wrote in a note cited by the paper. "If this acquisition materializes at this time we believeit would be prudent to issue equity at the expense of immediate term accretion."

ExxonMobil CEO Rex Tillerson has divested almost one-third of the company's gas stations during the past four years to exit markets where fuel demand is stagnating or declining, and has focused investment on higher-profit oil wells and chemical production, the news agency said. Exxon's portfolio of owned or leased stations fell to 7,753 as of Dec. 31, 2011, from 11,446 at the end of 2007, according to a company statement cited in the report.

In 2010, Exxon Mobil agreed to sell its downstream activities in Austria to Eni SpA (ENI), Italy's largest oil producer, which gained a retail network with 135 stations. In March last year, the U.S. company agreed to sell Argentine assets including a refinery and stations to Bridas Corp., the oil company part-owned by China National Offshore Oil Corp.

As of Jan. 29, 2012, Laval, Quebec-based Couche-Tard had a network of 5,817 c-stores, 4,225 of which include motor fuel dispensing, as well as agreements for the supply of motor fuel to 338 sites operated by independent operators. Couche-Tard's network consists of 13 business units, including nine in the United States covering 42 states and the District of Columbia (primarily under the Circle K flag), and four in Canada covering all 10 provinces (primarily under the Mac's and Couche-Tard flags).