July 8, 2020
New York Post
to quell possible antitrust concerns as it eyes a possible acquisition of the Speedway chain, The Post has learned.
Alimentation Couche-Tard — a Canada-based convenience-store giant whose chain of nearly 8,000 Circle K stores in the US includes 5,900 gas stations — has launched a process to sell 1,250 gas stations that are near Speedways, sources close to the situation said.
Couche-Tard is looking to raise about $4 billion with the sale, which would likely be contingent on a deal to buy all of Speedway’s 3,800 locations from Marathon Petroleum. Marathon, which recently revived an auction of Speedway after it got derailed in March by the coronavirus, is being prodded by billionaire Paul Singer to divest Speedway.
Other possible Speedway suitors include Seven & I Holdings, the Japan-based owner of 7-Eleven, which had been nearing a deal to buy Speedway for $20 billion before the pandemic hit, according to the Wall Street Journal. Marathon is also mulling a possible spinoff of Speedway, sources said.
Quebec-based Couche-Tard didn’t return calls. Marathon, based in Ohio, declined to comment on reports it has restarted its sale.
Couche-Tard may be looking to appease the Federal Trade Commission, which could be concerned that a combination of the two biggest gas-and-convenience-store chains could raise food prices at those locations, especially during a time when fewer people are going out to restaurants, sources said.
“Every C-store wants to offer more fresh food,” an industry source said. “That is the trend.”
The Canada company wants to step lightly with the FTC, one source added, noting that it was forced by the agency earlier this week to pay a $3.5 million penalty over allegations it had violated a 2018 order requiring it to sell 10 stations in Minnesota and Wisconsin after a smaller acquisition.
Convenience stores with gas stations make about half their money from fuel, but the other half that’s from in-store purchases carries much richer profit margins as high as 40 percent, an industry source said.
Last month, analysts at Barclays estimated Couche-Tard, which also owns 500 Holiday gas stations in the Upper Midwest, may have to divest 1,036 Speedway stores in a merger if the FTC forbids it from owning more than 35 percent of gas-and-convenience stores in any given market.
In Minneapolis, Couche-Tard has 223 Holidays and there are 80 Speedways, comprising 80 percent of the local market, Barclays said. The concentration would be similar in other cities including Cincinnati, Detroit and Tucson, Ariz., the bank added.
In New York City, there are 186 Speedways and only 21 Circle Ks so the combination would result in a likely acceptable 28 percent market share, Barclays said.
“While we certainly hope the FTC would take a much broader approach at assessing the size of the industry the c-stores compete in – including dollar stores, club stores, grocery stores, etc… historically, definitions have been largely limited to the exact vertical,” Barclays said.