Couche-Tard/Sinopec Deal: Short List, Long Odds

Analysts downplay Canadian chain's desire to acquire stake in Chinese retail network

Published in CSP Daily News

Sinopec China Couche-Tard (CSP Daily news / Convenience Stores / Gas Stations)

UPDATE: "A number of media outlets have reported that Alimentation Couche-Tard Inc. is among a handful of companies rumoured to be pursuing the acquisition of a minority stake in China's Sinopec," the company said in a statement issued Tuesday night. "Couche-Tard has no plan to invest in the Sinopec placement at this time. Furthermore, should Couche-Tard have material information to communicate, it would be timely circulated through a press release disclosing the news to the market."

LAVAL, Quebec -- Despite being short-listed as a suitor to take a $16-billion stake in China's Sinopec Sales, the world's largest fuel retail network, Alimentation Couche-Tard Inc. is unlikely to consummate a deal, analysts said.

As reported in a 21st Century Smoke/CSP Daily News Flash, Laval, Quebec-based Couche-Tard is among the companies rumored to be interested in buying a minority stake in Sinopec Sales, officially known as China Petroleum & Chemical Corp, according to Reuters, citing people familiar with the matter.

State-run Sinopec plans to sell up to 30% of Sinopec Sales by year-end 2014 as Beijing restructures government-owned assets. Sinopec Sales reported a net profit of 25.1 billion yuan ($4.1 billion) in 2013 from more than 30,000 gas stations and more than 23,000 convenience stores.

The sale is expected to generate between $16 billion and $20 billion for Sinopec, money which Asia's biggest refiner may use to pay down some of its debt and to reinforce upstream investments, said the news agency.

The deal is set to value Sinopec Sales at between $53 billion and $66 billion, giving it a price-to-earnings multiple of 13 and 16.3, according to Reuters calculations.

A likely exit through an initial public offering (IPO) planned within three years has attracted a wide range of suitors, the people said. The company also wants to boost non-fuel sales and is seeking investors to get into businesses such as car services, telematics, online-to-offline sales, financial services and advertising, the sources added.

China Life Insurance, ENN Energy Holdings, Fosun Group, Hopu Investment Management and Affinity Equity Partners have also progressed to the next round, said the people who declined to be identified as the sale process is confidential.

Couche-Tard CFO Raymond Paré declined to comment on a deal. Final bids are due by the end of August.

Continued on next page.

Part of CSP's 2014 Convenience Top 101 retailers

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