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Alimentation Couche-Tard Inc (ATD.B-T) struck a deal to buy Norwegian company Statoil Fuel and Retail ASA for 15.9 billion crowns ($2.8 billion US) to gain a foothold in Europe's top-performing economies.
Couche-Tard, which operates convenience-store chains in Canada and the United States, will pay 53 crowns per share, a 52.5 percent premium, for SFR, Scandinavia's top petrol chain operator.
The deal, which comes less than two years after Couche-Tard failed in a $2-billion bid to acquire U.S. convenience store chain Casey's General Stores (CASY-Q), will allow the Canadian retailer to target new markets outside its traditional North American base.
The deal, to be financed from existing and new credit facilities, will add 2,300 fuel stations to Couche-Tard's 5,800 stores and gives it a quickly expanding position in the Baltics, Poland and western Russia.
"We think because it is in Scandinavia and a lot more stable (than the rest of Europe) ... it is great timing entering the market, and Europe will eventually solve its financial issues," Chief Executive Alain Bouchard told a news conference.
Scandinavia has been relatively calm amid Europe's economic struggles, with Norway leading the way as its massive oil sector insulates it from the rest of the continent.
Norway's economy is expected to grow 3.25 percent this year, according to the central bank, compared with a stagnating euro zone. The rest of the Nordics are also expected to outperform neighbors to the south.
Couche-Tard, which will maintain SFR as a separate entity, will use its new subsidiary as the basis for further growth in Europe as oil companies increasingly separate their upstream, refining and retail operations.
"We plan to continue the organic growth that is happening at SFR and soon we will look at the divestments major oil companies have started to do in other counties ... We will use the Oslo base to manage these," Bouchard said.
SFR SHARES SURGE
SFR shares rose 51 percent to 52.3 crowns; SFR's biggest shareholder, Statoil, was broadly unchanged.
Statoil, Norway's top oil producer and the retailer's 54 percent shareholder, agreed to the sale, and will use its proceeds from the deal to focus on its core exploration and production business.
SFR operates the largest fuel retail network in Scandinavia and has expanded into Russia, Poland and the Baltics. It targets organic growth of 50 to 60 new stations a year, including 40 to 50 in central and eastern Europe, to add to its current network of 2,300.
The deal is conditional on regulatory approvals, particularly in Russia, Denmark and Poland, and on Couche-Tard's acquiring over 90 percent of SFR's shares.
Couche-Tard said it expects to use existing credit facilities and a new three-year $3.2 billion credit facility to finance the offer.
The new credit is committed by a syndicate of banks led by National Bank Financial, UBS, Rabobank, Scotiabank, HSBC and Bank of Tokyo-Mitsubishi - which also acted as Couche-Tard's financial advisers - with National Bank of Canada acting as administrative agent.
The offer is set to start no later than April 23; the initial offer period will be 20 U.S. business days and may be extended several times.
"We would advise investors to accept Couche-Tard's bid for SFR as we believe it represents a fair value for the shares. We think other bidders are unlikely to emerge with a higher bid," said Danske Markets analyst Martin Stenshall in a note to clients.
Couche-Tard's legal advisers are Davies Ward Phillips & Vineberg LLP, Haavind and Eversheds LLP. ABG Sundal Collier Norge ASA and Merrill Lynch International are acting as financial advisers to SFR.