AGREEMENT TO ACQUIRE CST BRANDS INC. - Couche-Tard

ALIMENTATION COUCHE-TARD INC.
AGREEMENT TO ACQUIRE
CST BRANDS INC.
August 2016
FORWARD-LOOKING INFORMATION AND CAUTIONARY LANGUAGE
This presentation and the accompanying oral presentation contain forward-looking statements within the meaning of applicable securities legislation. Forwardlooking statements are typically identified by words such as “projected”, “estimate”, “may”, “anticipate”, “believe”, “expect”, “plan”, “intend” or similar words
suggesting future outcomes or statements regarding an outlook. All statements other than statements of historical fact contained in these slides are forwardlooking statements.
Forward-looking statements involve numerous assumptions, risks and uncertainties. A variety of factors, many of which are beyond Alimentation Couche-Tard
Inc.’s (“Couche-Tard”) control, may cause actual results to differ materially from the expectations expressed in its forward-looking statements. These factors
include, but are not limited to, the effects of the integration of acquired businesses and the ability to achieve projected synergies, fluctuations in margins on
motor fuel sales, competition in the convenience store and retail motor fuel industries, foreign exchange rate fluctuations, and such other risks as described in
detail from time to time in documents filed by Couche-Tard with securities regulatory authorities in Canada, including those risks described in Couche-Tard’s
management’s discussion and analysis (MD&A) for the year ended April 24, 2016. Couche-Tard’s MD&A and other publicly filed documents are available on
SEDAR at www.sedar.com.
Unless otherwise required by law, Couche-Tard does not undertake to update any forward-looking statement, whether written or oral, that may be made from
time to time by it or on its behalf.
While the information contained in this presentation is believed to be accurate, Couche-Tard expressly disclaims any and all liability for any losses, claims or
damages of whatsoever kind based upon the information contained in, or omissions from, this presentation or any oral communication transmitted in
connection therewith. In addition, none of the statements contained in this presentation are intended to be, nor shall be deemed to be, representations or
warranties of Couche-Tard and its affiliates. Where the information is from third-party sources, the information is from sources believed to be reliable, but
Couche-Tard has not independently verified any of such information contained herein.
This presentation is not, and under no circumstances is to be construed as, a prospectus, an offering memorandum, an advertisement or a public offering of
securities. Under no circumstances should the information contained herein be considered an offer to sell or a solicitation of an offer to buy any securities. This
presentation does not constitute a solicitation of any vote or approval.
2
HIGHLIGHTS OF THE TRANSACTION
Strategic
Importance
Acquisition Rationale
• Unique opportunity to acquire one of few
remaining potential North American
public targets exceeding 1,000 stores
• ACT to exceed 10,000 North American
stores (including Esso Canada) providing
ACT with even more scale and leverage
to create brand awareness and take
advantage of merchandise and fuel
procurement opportunities
Rank
Chain Name
7-Eleven
8,273
#2
Couche-Tard/Circle K
7,276
#3
Speedway
2,770
#4
Casey’s General Stores
1,896
#5
CST Brands/Corner Store
1,318
#6
Aplus, MACS/Tigermarket, Stripes, Aloha (Sunoco Inc.)
1,309
#7
Murphy USA, Murphy Express
1,296
#8
ampm
970
#9
Kroger: Turkey Hill, Kwik Shop, Quik Stop, etc.
790
#10
Suncor Energy: Petro-Canada, Neighbours, SuperStop
750
Source: 2016 CSP Convenience Top 101
3
No. of Stores
#1
• US operating model strongly aligned with
ACT North America model – Companyoperated retail sites
• Strong geographic and strategic fit
• Strong entry into growing Texas market
with 600+ sites. Texas is one of the
fastest growing market in the US
• Fills in last remaining void in Southeast
US with CST’s acquisition of Flash
Foods in Georgia and Florida
• Opportunity to strengthen ACT’s network
in Colorado, Arizona, Quebec and
Ontario
• Talent acquisition and outstanding crosslearning potential
• Significant and valuable real estate
portfolio
• Potential to leverage CST’s existing MLP
structure
Significant Synergy
Potential
• Additional convenience sales and fuel
volume present top-line upside
• Significant efficiency gains through
sharing of business awareness and best
practices
• Cost optimization through combination of
two large and successful companies
• Optimization of supply conditions through
ACT’s procurement strategy
• Optimization of distribution strategy
• Elimination of redundant costs
TRANSACTION SUMMARY
•
•
•
•
•
•
•
•
Alimentation Couche-Tard Inc. (“ACT”) has entered into a merger agreement to acquire 100% of the outstanding shares of CST Brands Inc.
(“CST”) by merger, representing a total enterprise value of US$4.43 billion or approximately US$4.28 billion excluding the value of CST’s equity
participation in CrossAmerica Partners LP (“CAPL”)
• CST shareholders to receive a cash consideration of US$48.53 per share
• Implied CST EBITDA multiple of 10.4x pre-synergies (1), 7.0X to 7.6x post-synergies (1)
Transaction is expected to generate between US$150M and US$200M in pre-tax annual cost synergies to be realized 24-36 months after closing
Merger expected to be accretive to earnings within the first year post closing – 40-50 cents EPS accretion expected within third year post closing
Couche-Tard expects to finance the purchase of CST, including the refinancing of a portion of CST’s existing indebtedness through:
• Capacity under existing revolving credit facilities
• New acquisition debt financing consisting of term loans of which a portion will be termed-out over time
Provides ACT control over CAPL’s General Partner, ownership of associated Incentive Distribution Rights and equity stake of 19% in CAPL
• CAPL is a distributor of branded and unbranded petroleum for motor vehicles in the United States
Following acquisition of CST, ACT will sell a majority of CST’s Canadian assets to Parkland Fuel Corporation for approximately US$750M
Strong value creation through:
• Significant EPS accretion
• Strong free cash flow generation
• Continued capacity to invest in existing business
• ACT’s usual discipline which will allow for rapid deleveraging and adequate positioning to seize future investment opportunities
The transaction is subject to CST shareholders approval, to customary regulatory approvals and to closing conditions. We anticipate that the CST
transaction will close early calendar year 2017
(1)
(2)
(3)
4
Pro forma the Flash Foods acquisition, the California and Wyoming sale of assets and adjusted for non-recurring expenses. Excluding CrossAmerica Partners LP.
All financial information in this presentation is in US dollars, except if otherwise indicated
All information in this presentation exclude CrossAmerica Partners LP, except if otherwise indicated
ALIMENTATION COUCHE-TARD INC.
ALIMENTATION
COUCHE-TARD
OVERVIEW
ACT SNAPSHOT
•
Listed on the Toronto Stock Exchange
ATD.B
•
Market Cap
CA$35B
•
Revenues
US$34.1B Fiscal Year 2016
•
Gross Profit
US$6.0B Fiscal Year 2016 (+15.4%)
•
EBITDA
US$2.3B Fiscal Year 2016 (+24.3%)
•
Number of stores
12,021



•
Europe
2,659
International
1,474
FY 2016
US$2.3B / 0.97x
Ratings


6
7,888
Net Debt / EBITDA Leverage

•
North America
S&P
BBB
Moody’s
Baa2
Couche-Tard’s vision is to become
the world’s preferred destination for
convenience and fuel
Our mission is to offer our
customers a fast and friendly service
by developing a warm and
customized relationship with them,
while finding ways to pleasantly
surprise them on a daily basis
We strive to meet the demands and
needs of people on the go. We offer
food, hot and cold beverages, car
wash services, road transportation
fuel and other high quality products
and services designed to meet or
exceed customers’ demands in a
clean, welcoming and efficient
environment
COMPANY HIGHLIGHTS
Broad Geographic Footprint with Leading
Market Positions
Superior Product Offerings
Track Record of Highly Disciplined Growth
and Debt Reduction
• Increasing focus on private label, fresh food products and famous for concepts
• Industry leading merchandise gross margin
• Proven ability to integrate acquisitions (More than 5,900 stores from 52 acquisitions since Circle K in 2003, including SFR, The
Pantry and Topaz)
• Well positioned to lead further consolidation in fragmented industry
• Committed to remain investment grade post acquisition
Attractive Sector Dynamics
•Steady industry performance throughout downturns with strong projected growth
•C-store sector well positioned to gain share from traditional food retail
•Industry-leading returns in recession
Powerful Financial Results
•Strong and consistent financial performance throughout all economic cycles
•Prolific history of positive same-store comps and 27% Return on equity
•Significant FCF generation (2011-2016) CAGR of 23%
Attractive Synergy Potential
Disciplined Management Culture
7
• Leading C-store operator in North America, Scandinavia, Ireland and Baltics
• Multiple banners (Couche-Tard, Circle K, Mac’s, Ingo, Statoil, Kangaroo Express and Topaz) that will be rebranded to the strong
and well-established Circle K banner (except Couche-Tard in Québec, Canada) to drive traffic and sales
• World class Canadian retailer with most geographically diversified footprint
•Proven ability to extract significant synergies from acquisitions
•Transferring best practices across entire platform
•Management team with strong track record and founders have 23% equity ownership as of April 24, 2016
•Management and Board need to hold a multiple of their salary in Shares
•Decentralized operating model
NORTH AMERICAN NETWORK
Leader in the
Canadian
convenience store
industry
Largest independent
convenience store
operator in the US in
terms of number of
company operated
stores
North America network of 7,888 stores increasing to ~8,200 stores pro forma for the acquisition of 279 from Imperial Oil in Canada
As of April 24, 2016.
8
EUROPEAN NETWORK
Leader in convenience
store and road
transportation fuel retail in
the Scandinavian and
Baltic countries and
Ireland.
2,659 stores in 9 countries or regions in Europe
As of April 24, 2016.
9
INTERNATIONAL PRESENCE
Almost 1,500 licensed Circle K stores in Asia, Costa Rica, Egypt, Honduras, Mexico and U.A.E
As of April 24, 2016.
10
ACT - HISTORY OF STRONG FINANCIAL PERFORMANCE
Gross Profit
(in millions of US Dollars)
Same Store Sales
16% CAGR
6,082
4,988
4,610
2,553
2010
2,746
2011
5,268
2010
Merchandise Sales
US
2.9%
Europe
Canada
4.8%
2011
2012
2013
2014
2015
2016
4.2%
1.8%
2.7%
2.8%
1.0%
2.0%
3.8%
1.6%
1.9%
3.9%
2.0%
3.4%
4.6%
2.8%
2.9%
Motor Fuel Volume
US
1.0%
Europe
Canada
3.0%
0.7% 0.1% 0.6%
3.9% (0.9%) 0.0%
1.7%
2.5%
1.3%
3.4%
2.4%
(0.1%)
6.6%
2.6%
0.9%
2,975
2012
2013
2014
2015
2016
EBITDA
(in millions of US Dollars)
Free Cash Flow
(1)
(in millions of US Dollars)
24% CAGR
25% CAGR
2,332
979
1,876
1,640
1,376
647
734
2010
2011
614
841
278
2012
2013
2014
2015
2016
2010
378
404
2011
2012
2013
2014
Proven track record of significant growth
(1)
11
1,067
865
Free Cash Flow defined as: EBITDA minus total CAPEX (excluding price paid for acquisitions), net dividends paid, net interests paid
and net income taxes paid plus proceeds from disposal.
2015
2016
ACT - PROVEN TRACK RECORD OF SUCCESSFUL ACQUISITIONS
12
(1)
(2)
(3)
(4)
Represents Total Debt/ Adjusted EBITDA. Presented on a pro forma basis.
Including full-year results for Statoil Fuel & Retail. Refer to the Corporation’s MD&As for more details.
Adjusted for non-recurring items. Refer to the Corporation’s MD&As for more details.
Pro forma The Pantry for 2015 and Topaz for 2016.
ACT – SUMMARY OF REALIZED COST SYNERGIES – MATERIAL ACQUISITIONS
Circle K
Objective
Realized
>$50M
>$87M
Statoil Fuel & Retail
Objective
Realized
$150-$200M
>$200M
Track record of delivering and even
surpassing our cost synergies
objectives
13
The Pantry
24-month objective
Identified after 13 months
Realized after 13 months
$112M
$92M
$82M
Pantry synergies exclude fuel
supply synergies from the
rebranding of more than 1,000
stores in the Southeast US
On track to meet our 24-month
objective
ACT - EXCEPTIONAL DELEVERAGING TRACK RECORD
• ACT committed to maintaining a strong balance sheet and sustaining its investment grade credit rating
• Track record of rapid deleveraging after landmark acquisitions
Adj. Net Debt / Adj. EBITDAR
Circle K Acquisition
2,453 Stores Acquired
1,017 Stores Acquired
Rapid deleveraging
after
transformational
acquisition
Strong credit metrics for several years
$804M
Acquisition
14
2,299 Stores
Acquired
Leverage post SFR
acquisition lower than
Circle K
$3.6B
Acquisition
1,547 Stores
Acquired
$1.7B
Acquisition
4.2
3.6
3.2
3.0
3.2
2.9
2.5
F2004
(1)
(2)
The Pantry
Acquisition
SFR Acquisition
No Transformational Acquisition
Pro forma The Pantry
Pro forma Topaz.
F2005
F2006
F2007
F2008
F2009
3.1
2.7
F2010
2.1
2.1
F2011
F2012
2.4
Pro Forma
F2013
F2014
2.2
2.0
F2015 (1)
F2016 (2)
ALIMENTATION COUCHE-TARD INC.
CST OVERVIEW
CST OVERVIEW
•
•
CST operates as an independent retailer of motor fuel and convenience in the United
States and Eastern Canada
•
US public company (NYSE ticker: CST) with a market capitalization of ~ $3.4B
•
Fuel offer mainly branded Valero in the US and Ultramar in Canada
•
Convenience offer mainly branded Corner Store in the US and Dépanneur du
Coin/Corner Store in Canada
•
1,146 locations in the US (1)
•
873 locations in Canada + Commercial & Home Heat business
•
Owns underlying real estate for approximately 1,000 sites (800 in the US and 200 in
Canada) (1)
•
Last-twelve month period ended June 30, 2016 reported EBITDA of US$433M
•
In February 2016, CST acquired Flash Foods for $425M:
•
•
165 stores in Georgia and Florida
•
~300 million gallons, ~$1B in revenues, EBITDA of ~$35M
In July 2016, CST sold 79 stores in California and Wyoming for $408M
•
•
4%
27%
45%
Merch. & Serv.
51%
Fuel
73%
Others
~190 million gallons, ~$600M in revenues, EBITDA of ~$40M
CST owns an investment in CrossAmerica Partners LP, an MLP focused on fuel
wholesale and property rental
•
CST controls the general partner of CrossAmerica Partners LP and owns 100% of
the Incentive Distribution Rights
•
CST holds a 19% equity/economic stake worth ~ $150 million
(1)
(2)
16
Gross Profits (2)
4th largest chain in North America, with
US
Canada
Total
Per Site
Motor fuel gallons (2)
3.0 billion
~1.5 million
Merchandise sales (2)
$2.0 billion
~$1.3 million
As of June 30, 2016, Pro forma sale of 79 California and Wyoming sites. Excludes CrossAmerica Parners LP.
LTM June 30, 2016, Pro forma sale of 79 California and Wyoming sites and acquisition of Flash Foods. Excludes CrossAmerica Parners LP.
CST RETAIL NETWORK
US Network
1,146
company
operated
sites
Canadian
Network
-305 company
operated sites
-72 cardlock sites
-496 commission
agents sites
As of June 30, 2016. US Network pro forma sale of 79 sites in California and Wyoming.
17
ALIMENTATION COUCHE-TARD INC.
PRO FORMA PROFILE
PRO FORMA NORTH AMERICA FOOTPRINT
• COUCHE-TARD

US: 6,052

Canada: 1,836
• CST (1)

US: 1,140

Canada: 873 (2)
• Esso Canada

Ontario: 229

Quebec: 50
• Total

US: 7,192

Canada: 2,988

North America: 10,180
536
154
137
179
32
57
150
37
(2)
(3)
26
648
2
31
19
(1)
15
CST acquisition will allow ACT to
further diversify its operations and
cash flow with a stronger presence
in Texas, a fast growing and
business friendly state.
As of June 30, 2016, pro forma sale of California and Wyoming sites.
Excludes CrossAmerica Parners LP
Not taking into account subsequent sale of certain Canadian assets
CST site count on map is as of December 31, 2015 , pro forma sale of
California and Wyoming sites. Does not take into account subsequent sale of
certain Canadian assets
PRO FORMA PROFILE - FINANCIAL
Couche-Tard to strengthen its leadership position as a global convenience store operator with pro forma EBITDA of $2.9B
(2)
(billions of US Dollars)
Revenues
(1)
At Closing
Pro Forma
38.4
9.3
47.7
81%
19%
100%
6.5
1.3
7.8
% of total
83%
17%
100%
Adj. EBITDA
2.5
0.4
2.9
12,453 (3)
2,013
14,466
% of total
Pre-synergies EBITDA Contribution
5%
3%
GP
Store network
(1)
(2)
(3)
Couche-Tard Fiscal 2016 results pro forma the acquisition of Shell Denmark, Topaz and Esso Canada.
CST LTM financial results as at June 30, 2016 pro forma the acquisition of Flash Foods and divesture of 79 sites in California and Wyoming.
Excludes CrossAmerica Partners LP and the anticipated effect of the sale of certain Canadian assets.
Includes Couche-Tard’s Company-Owned/Dealer-Operated and Dealer-Owned/Dealer-Operated sites.
20
14%
83%
CROSSAMERICA PARTNERS LP

CST controls the general partner of CrossAmerica Partners LP (CAPL)
 Ticker: NYSE-CAPL – Market cap of approx. $800M (1)
 Formed in 2012, CAPL is a distributor of branded and unbranded petroleum for motor vehicles in the United States and
distributes fuel to more than 1,100 locations and owns or leases more than 800 sites. CAPL’s footprint geographic footprint
covers 29 states
 CAPL is a key component of CST’s growth strategy and provides for added optionality to fund its expansion

CST owns about 19% of CAPL common units – ~ 6.2 million units – Value of ~$150M (1)

CST owns 100% of the CAPL Incentive Distribution Rights (IDRs)
 IDRs provide CST with disproportionate cash flow as partnership distributions increase to “incent” the general partner to run and
grow the operations and increase cash flow to its unitholders

Sources of income for CST
 Cash distributions ~ $15M
 IDR income paid in CAPL units ~ $2.6M

ACT believes it has the tools and resources to optimize the value to shareholders
(1) Based on CAPL closing unit price as of August 15, 2016., the day preceding rumors in the medias about ACT being the winning bidder for CST.
21
MAJORITY OF CST’S CANADIAN SITES TO BE SOLD TO PARKLAND

In order to divest non-core business and to address possible overlap in Canada, ACT has entered into a
binding agreement with a Parkland Fuel Corporation (“Parkland”) to sell a large portion of CST’s
Canadian assets for approximately $750M. Preliminary scope of the sale transaction includes:




22
The Commercial & Home Heat business
All of the Cardlock business
All of the dealers and commission agents business
A portion of the company operated stores network (number of sites to be determined following review by the Competition
Bureau)

Parkland to assume all of CST Canada SG&A costs and liabilities, except for retained SG&A costs and
liabilities

Parkland to take on most of CST Canada employees, except for retained employees

Parkland has committed financing

Overall, the transaction is expected to allow ACT to reduce its leverage and debt

The transaction is subject to customary regulatory approvals and closing conditions and is expected to
close 3 to 6 months after the closing of the CST transaction
ALIMENTATION COUCHE-TARD INC.
INTEGRATION &
FORECASTS
INTEGRATION STRATEGY
Evaluate
talent pool
and secure
key
employees
Sale of CST
Canadian
assets
Integrate
operations &
eliminate
redundant
costs
Integrate
support
functions,
technology
and systems
& eliminate
redundant
costs
Roll-out key
programs–
Polar Pop,
Simply Great
Coffee,
ATMs, etc.
Rebrand to
Circle K/
Couche-Tard
Transfer CST
to existing
ACT non-fuel
agreements
to unlock
procurement
synergies
Re-negotiate
ACT existing
agreements
to leverage
increased
scale
Review
distribution
strategy
Further evaluate MLP structure, conclude on optimal strategy and execute
Well planned and efficient integration strategy – Similar to The Pantry
24
AREAS OF SYNERGIES
Merchandise Supply Costs
• Synergies from transitioning CST and Flash Foods purchase volume to ACT’s agreements
• Expect synergies in line with level of synergies achieved for The Pantry
• Excludes synergies expected from optimization of distribution strategy
Fuel Sourcing & Distribution Costs
• Improvement in Flash Foods’ supply conditions
• Improvements in CST’s and Flash Foods distribution costs and operational execution
Operating Expenses and Overhead
• Review store maintenance strategy – Operational efficiency & costs savings
• Optimization of store labor
• Align media & advertising levels to ACT’s
• Standardization of insurance programs
• Electronic payment fees
• Optimization of support organization structure
• Elimination of redundant shareholders’ costs
Couche-Tard expects annual pre-tax cost synergies ranging from $150M to $200M be realized 24-36 months after closing
25
FORECASTS
Leverage (2)(3)
Adj. Free cash flow (1)(3)
9% CAGR
1,437
1,489
3.5
1,544
3.1
2.6
1,208
986
2.2
2.0
1.8
798
FY16
Y1
1.4
Y2
Y3
Y4
Y5
FY16
PF
Y1
Y2
Y3
Y4
Y5
Strong cash flow coupled with disciplined capital allocation and debt repayment to provide financial
flexibility and ample room for continued growth
ACT anticipates EPS accretion to reach 40 to 50 cents during the third year following the acquisition
(1)
26
(2)
(3)
Adjusted EBITDA minus total CAPEX (excluding price paid for acquisitions), net dividends paid, net interests paid and net income taxes paid plus proceeds from
disposal.
Adjusted net debt / EBITDAR. Adjusted net debt defined as total debt plus 8 times net rent expense less cash.
Before the anticipated effect of the sale of certain Canadian assets.
PROVEN RECORD OF DISCIPLINED DEBT PAYDOWN
At close, pro forma leverage expected to stand at 3.5x(3) (Adjusted Net Debt / Adjusted EBITDAR)
Combined company expected to benefit from strong free cash flow generation & robust EBITDA growth
Scalable capital expenditure allows flexibility to achieve deleveraging plan
Management targets reaching an Adjusted Net Debt/EBITDAR ratio of 2.6x within 18-24 months after closing
•
•
•
•
Adj. Net Debt / Adj. EBITDAR
Circle K Acquisition
No Transformational Acquisition
2,299 Stores
Acquired
2,453 Stores Acquired
1,017 Stores Acquired
Rapid deleveraging
after
transformational
acquisition
Strong credit metrics for several years
$804 M
Acquisition
The Pantry
Acquisition
SFR Acquisition
CST & Esso
Acquisitions
1,547 Stores
Acquired
$3.6 B
Leverage post SFR
Acquisition
acquisition lower than
Circle K
2,298 Stores
Acquired
$6.0 B
Acquisitions
$1.7 B
Acquisition
4.2
3.6
3.2
3.0
3.2
2.9
2.5
F2004
F2005
F2006
F2007
F2008
F2009
F2010
3.5
3.1
2.7
2.1
2.1
F2011
F2012
2.4
Pro Forma
F2013
F2014
2.6
2.2
2.0
F2015 (1)
F2016 (2)
Pro Forma (4)
Couche-Tard is committed to reducing its Adj. Net Debt / EBITDAR below 3.0x within 24 months
27
(1)
(2)
(3)
(4)
Pro forma The Pantry
Pro forma Topaz.
Rent capitalized at 8.0x.EBITDAR adjusted for non-recurring items. Refer to Couche-Tard’s MDA for more details.
Assuming transaction closed April 24 2016. Including the annualized contribution of FY2016/FY2017 Couche-Tard acquisitions. Before the anticipated effect of the sale of certain
Canadian assets.
18-24 months
ALIMENTATION COUCHE-TARD INC.
FINANCING PLAN
FINANCING

Transaction financing needs of ~$4.8 billion (including acquisition costs), funded through
Capacity under ACT’s existing credit facilities
New acquisition financing consisting of term loans – three tranches with 1, 2 and 3 years terms

ACT expects to repay for the term loans through
Proceeds from the sale of Canadian assets
Proceeds from sale of other non-core assets
Term out to the bonds market
Free cash flow

Financing strategy will allow
 Access to capital at competitive conditions
 Flexibility to repay debt rapidly
 Capacity to modulate debt maturities
Competitive, well balanced and flexible financing structure
29
PROJECTED MATURITY PROFILE AFTER BOND ISSUANCE AND SALE
OF CANADIAN ASSETS
FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 FY 25 FY 26 FY 27 FY 28 FY 29 FY 30
ACT senior unsecured notes
ACT revolving credit
New term loans
Other debt & cap. leases
Net swaps
CAD Bonds
US Bonds
Well spread maturities will allow ACT to optimize its financial flexibility
30
ALIMENTATION COUCHE-TARD INC.
CONCLUSION
KEY TAKEAWAYS
Rationale
Integration & Growth
Value Creation
•CST & CAPL provide unique/rare sizeable opportunity in the US
•Increased scale advantage and brand awareness
•Great geographic fit
•Talent acquisition and cross-learning opportunity
•Efficient integration through ACT’s scalable infrastructure
•Run rate synergies of $150M-$200M – Realized within 3 years
•Incremental top-line growth opportunities
•Strong cash flow generation will allow ACT to continue to invest for growth
•EPS accretion in year 1 – 40-50 cents EPS accretion within 3rd year
•Strong free cash flow generation
•Continued investment in existing business
•Usual discipline will allow ACT to deleverage rapidly and position itself to seize
investment opportunities
Strategic acquisition will allow ACT to unlock growth, efficiency opportunities and value
32
ALIMENTATION COUCHE-TARD INC.
APPENDIX
PRO FORMA PROFILE – GROSS PROFITS BREAKDOWN
(1)
(2)
Canada
12%
Europe 25%
By
Geography
United
States
63%
Canada
100%
TBD
United
States
73%
United
States
63%
Others
4%
Others
31%
Fuel
45%
Others
4%
Merch. &
Services
1%
Fuel
42%
Merch. &
Services
55%
Fuel
44%
Merch. &
Services
51%
Fuel
68%
Couche-Tard to strengthen presence in Canada and United States markets
(1)
(2)
34
Canada
17%
Europe 20%
Canada
27%
Others
3%
By
Products
Pro Forma
FY 2016 pro forma Topaz and Shell Denmark.
CST LTM June 30, 2016, pro forma Flash Foods acquisition and sale of California/Wyoming sites. Excludes CrossAmerica Partners LP and the
anticipated effect of the sale of certain Canadian assets.
Merch. &
Services
52%
CST VALUATION SUMMARY
(million US dollars unless otherwise indicated)
Price per share
Number of diluted shares (millions)
48.53
77.9
Equity value
3,780
CST debt as of June 30, 2016
1,312
Expected cash proceeds from sale by CST of its California and Wyoming stores
(408)
CST cash as of June 30, 2016
(193)
Cash from exercise of CST stock options
(63)
CST enterprise value
4,428
Value of equity investment in CrossAmerica Partners LP
(150)
CST enterprise value, net of equity investment in CrossAmerica Partners LP
4,278
LTM PF corporate EBITDA multiple (1)
10.4x
Operating EBITDA multiple is within range of usual prices paid by ACT. Difference between corporate EBITDA multiple
and operating EBITDA multiple points towards significant available synergies.
(1) LTM June 30, 2016, pro forma Flash Foods acquisition and sale of California and Wyoming stores. Adjusted for $9M in non-recurring items.
35
PRO FORMA ADJUSTED LEVERAGE – ADJUSTED NET DEBT / EBITDAR
ACT Pro Forma April 24,
2016 (1)
4,343
4,746
9,089
Rent
390
47
437
Rent capitalization (8 X rent)
3,120
376
3,496
Adjusted debt
7,463
5,122
12,585
599
193
792
Adjusted net debt
6,864
4,929
11,793
Adjusted EBITDA
2,522
412
2,934
390
47
437
2,912
459
3,371
2.4
-
3.5
Rent
EBITDAR
Ratio
36
Pro forma
Debt
Cash
(1)
(2)
CST Transaction (2)
Pro forma Topaz, Shell Denmark, Esso Canada acquisitions
As of June 30, 2016, Pro forma Flash Foods acquisition and sale of California/Wyoming stores. EBITDA adjusted for $9M in non-recurring items.
Excludes CrossAmerica Partners LP and the anticipated effect of the sale of certain Canadian assets.