Alimentation Couche-Tard To Buy Pantry Inc. In $1.7 Bln Deal

(RTTNews) - Canadian convenience store operator Alimentation Couche-Tard, Inc. (ANCUF, ATD_B.TO, ATD_A.TO) agreed Thursday to acquire U.S. peer Pantry, Inc. (PTRY) for $36.75 per share in an all-cash deal valued at about $1.7 billion, including debt assumed. The deal will strengthen Couche-Tard's position in the attractive Southeastern and Gulf Coast of the U.S.

"The Pantry is an excellent company and is well positioned in the Southeastern and Gulf Coast regions of the U.S., two of the fastest growing areas of the U.S. With this transaction we will add more than 1,500 stores to our network which will position us as the definitive leader in this region and will reinforce our position as one of the largest convenience store operators in North America," Couche-Tard's President and CEO Brian Hannasch said in a statement.

The offer price of $36.73 represents a premium of 27 percent over Pantry's closing share price of $28.86 on Tuesday, the last trading day prior to public media reports on Pantry exploring a potential transaction.

The Wall Street Journal reported that Pantry has hired an investment bank to run an auction, with bids for the company due last week.

Couche-Tard noted that the all-cash deal is expected to be funded by its available cash, existing credit facilities and a new term loan.

The deal, unanimously approved by the Boards of Directors of both companies, is expected to close in the first half of 2015. The closure of the deal is primarily subject to approval of Pantry shareholders and customary regulatory approvals. The terms of the agreed deal also includes a customary breakup fees.

"This is an exciting combination of two strong companies that complement each other extremely well. Unlocking the strategic value of these combined firms will benefit the current Pantry shareholders and provide ongoing opportunities for most of our employees," Pantry President and CEO Dennis Hatchell stated.

Cary, North Carolin-based Pantry operates convenience stores in the southeastern U.S. Its stores provide food, beverages, non-food merchandise and fuel, as well as ancillary products and services. It also operates 233 proprietary foodservice and quick service restaurants at its locations.

As of December 18, 2014, the Company operated 1,512 stores in thirteen states under select banners, including Kangaroo Express, its primary operating banner.

In early December, Pantry reported net income for the fourth quarter of $14.7 million or $0.63 per share, up sharply from $1.0 million or $0.04 per share in the year-ago period. However, total revenues for the quarter declined to $1.96 billion from $2.02 billion in the same quarter last year.

Comparable store merchandise revenue for the quarter increased 2.6 percent. Fuel gross profit increased 2 percent from last year to $203.8 million, as retail fuel margin per gallon increased 6 percent to $0.122.

Meanwhile, Couche-Tard is the leader in the Canadian convenience store industry. In the U.S., it is the largest independent convenience store operator in terms of number of company-operated stores. In Europe, Couche-Tard is a leader in convenience store and road transportation fuel in Scandinavian and Baltic countries while it has a significant presence in Poland.

As of October 12, 2014, Couche-Tard's network comprised 6,303 convenience stores throughout North America, including 4,851 stores with road transportation fuel dispensing.

PTRY closed Wednesday's regular trading session at $35.52, up $2.52 on a volume of 2.03 million shares. ATD-A.TO closed at C$44.56, up C$0.18 percent on a volume of 2,500 shares and ATD-B.TO closed at C$42.54, up C$0.02 on a volume of 1.95 million shares.