mercredi 13 janvier 2021

Couche-Tard buys Carrefour: The market doesn't like

Big news yesterday: Couche-Tard could buy hypermarket giant Carrefour.

Some people are thrilled, others are worried. Well, most people seem worried given the fact that Couche-Tard was down by more than 10% today. 

I'm a bit of both. I don't know Carrefour that much. I've only been in one of their stores, while I was in China, three years ago. I only remember that it was huge. But, was it because it was in Shanghai and everything is huge there? I don't know.

Here's a list of pros and cons about the acquisition. Please, feel free to use the comment sections to add your thoughts about it. 


Couche-Tard would be much less exposed to electric cars;

It would be a huge international expansion;

Carrefour is very cheap (PE ratio between 8 and 9), even fraudulent companies are more expensive than that;

Interest rates have never been so low, which is excellent when you need billions of dollars;

Couche-Tard has a great track record related to acquisitions.

There may be synergies (I'm not sure about that...)


Different culture (Carrefour is a french company that operates mainly in Europe and Asia);

It would be a very big acquisition (more than 28 billion euros (not dollars) including debt);

Low ROE;

Huge debt;

Decreasing revenues over the last 10 years;

Maybe french governement will do something to stop the acquisition.

I'll need a little more time, but to me, it looks like Couche-Tard wants to make us forget the fact that electric cars are coming and represent a big threat for their business model. While Couche-Tard is great for acquisitions and improving a struggling business, this time, they'll have to swallow a gigantic bite (which is not a bite actually, it's more like a blue whale) that has been struggling for years in a sector that isn't the historical strength of Couche-Tard.

At first glance, I think there's a lot of risks there. 

I don't know if I'll keep my shares. I'll think a bit more about it. 

Please, help me make my mind. I feel so alone. 

12 commentaires:

  1. Fuck Canadian stocks. Even when they do well they often end up disappointing.

  2. Sorry Penetrator, I don't follow Couche-Tard (can't follow everything nor should I)...

    This is a field of investing that the late Marty Whitman wrote about a lot...'Resource Conversion', or as Joel Greenblatt referred to as Corporate Event or Special Situation' investing...

    Brookfield do this type of thing all the time (Bruce Flatt often worked with Whitman on various business deals)...It involves making acquistions, spinning off divisions, buying back shares, doing private placements, taking other companies out of bankruptcy and so on...
    There has been a lot of this type of activity in my own portfolio lately as follows...

    Intact Financial...

    Intact sealed an agreement Wednesday to buy the Canada, U.K. and international operations of London’s RSA Insurance Group Plc as part of a $12.3 billion (US$9.4 billion) transaction. Denmark’s Tryg A/S is taking RSA’s Swedish and Norwegian operations...

    Whitecap Resources...

    Whitecap Resources Inc. is buying TORC Oil & Gas Ltd. for $565 million in an all-stock deal, plus the assumption of $335 million in TORC debt, the companies announced Tuesday...

    Brookfield Asset Management...

    Brookfield Asset Management Inc. and a group of investors have offered to acquire the stake in Brookfield Property Partners that they don’t already own, in a US$5.9 billion deal to take the real estate company private...

    When I invest in a company now I concentrate on the management team, the business model and the industry they operate in...I try to focus on management teams that are long-term in thinking and share-holder friendly...but thats me.

    So I guess my question to you is this...How much faith do you have in the management team at Couche-Tard?

    1. I trust them a lot. But their industry faces some challenges and that acquisition is a VERY big bite.

    2. On other thing you could try is to read what the manage team at Couche-Tard is saying about this transaction. What are their arguments about justifying this move.

      A good management team should be able to communicate clearly their investment thinking to their stakeholders. I often read about what management is saying when I what more information about what they are doing.

  3. I am keeping my shares. Management has a long history of creating value for shareholders. They are buying Carrefour on the cheap and their track record suggests we should trust their judgement. Carrefour may be worth more than the sum of its parts.

    There is also a very good chance that the transaction is blocked by the French government. They are only for free markets when their companies are buying. French companies gobbled up most of Italy's crown jewels, and it was supposed to be allowed in the name of "free market" and "European cooperation", but when an Italian company wanted to buy a major French shipyard, the transaction was blocked by the French government.

    1. "Carrefour may be worth more than the sum of its parts." --­ I meant the sum of the parts (divisions, real estate...) may be worth more than the public company at the moment.

  4. I shop about once per month in Carrefour (Spain), just for proximity, not by choice. And I would like to share some details:

    I prefer Alcampo (owned by Auchan), a private french competitor. They have better private brands products, and also cheaper branded products. The shopping experience is almost the same.

    LFL sales were flat to negative for Carrefour in Europe and France before 2020.

    Some Carrefour stores have petrol stations, but I don't know which % it does represent among total stores.

    They have thousands of convienience stores in some markets branded as "Carrefour Express".

    LatAm is growing fast, but EM markets deserve EM multiples.

    In 2019 they sold Carrefour China and some cargo property assets. Did someone said diworsification? Maybe the actual management team is more focused, I don't know...

  5. I believe that ATD may have a different game plan. It may just want to put the company in play as a way to possibly acquire only what it really wants. They have a lot of wisdom and experience over all those years. Personally I doubled down on my shares since Mr. Market is kind enough

  6. I think the market is being a bunch of Couche Tards here... we added to our position. It's amazing how little credit this mgmt team gets. They have compounded FCF at over 20% for nearly 3 decades...

    1. Thanks for sharing.
      I added too,
      Now 13% of portfolio.
      I don't like having such big positions, but I couldn't help it ;)

  7. They should just buy Dollarama for $20B