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2021 - A Critical Year For Alimentation Couche-Tard

Edward J. Roche profile picture
Edward J. Roche


  • The Stock is undervalued by at least 30-50%.
  • A 2021 Change in Shareholder ownership could unlock significant shareholder value.
  • I have significantly increased holdings after the January price drop.

Anyone contemplating an investment in Alimentation Couche-Tard (OTCPK:ANCUF) should read the great business book "Daring to Succeed" by Guy Gendron, 2016 Juniper Publishing. It lays out the entire story of how Alain Bouchard built a multibillion dollar business starting with nothing. Bouchard had very humble beginnings at one point living in a mobile home in Quebec after his father's construction business went bankrupt. He started in the convenience store business as a stock boy in his brother's Perrette milk store. Bouchard went on to found his own convenience store company Couche Tard in 1980. Over the next 34 years he led that company as it grew from one store to over 12,500 stores around the world. One of the great lessons from the book is that Bouchard is a very aggressive risk taker. He fired one bank adviser when it told him he should be more conservative. At another point his banker told him he was technically bankrupt.

Bouchard relinquished the CEO role in 2014 to Brian Hannasch but remains as Chairman of the Board. Hannasch has done a remarkable job in overseeing multiple acquisitions, including the large ($4.4B) acquisition of CST brands that greatly expanded the North American business. In my view Hannasch has been a steady hand perhaps somewhat moderating the aggressiveness of Bouchard at times.

The Business

In 2020 Couche Tard had 73% of revenues from North American operations, 16% from Europe and 12% from Canada with a similar profit split. The company has some Asian operations but they are small at present. These were expanded with the recent $360 MM deal to purchase Convenience Retail Asia Ltd.'s Hong Kong unit. Merchandise and Service make up 27% of revenues and 52% of profits with Road transportation/fuel making up most of the rest. Among Merchandise and Service, tobacco products make up an important 41.3%, beverages 14.8%, beer and wine 12.2%, Food Service 11.7% with

This article was written by

Edward J. Roche profile picture
Edward Roche is the President of Freedom Mountain Investments (http://www.freedommount.com/), an investment firm founded in 2006, located in Paoli, Pennsylvania. Freedom Mountain specializes in identifying hidden value in small and mid size companies before they are recognized by the market. The investment approach is based upon fundamental analysis and places a high emphasis on real and rising financials including sales and earnings. One special approach used to identify a catalyst for release of value is the “Venerable Owner” strategy. This strategy tracks all companies where an older owner owns 40% or more of a company. These situations often lead to sale of the company at a significant premium to market value when the owner seeks to retire. Edward Roche received a Ph. D. degree in Polymer Science and Engineering from the University of Massachusetts and earned an MBA in Finance from the Haub School of Business, St. Joseph’s University, Philadelphia PA. He recently completed a career at the McNeil division of Johnson & Johnson that included high level positions in Business Development and R&D. He is the inventor on 15 US patents in the area of drug delivery and has authored ten scientific publications.

Analyst’s Disclosure: I am/we are long ANCUF, ATD.B. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (86)

Edward J. Roche profile picture
Couche Tard reported strong results last night beating on both EPS and revenues. For some reason SA did not pick it up. Stock up nicely today.
Edward J. Roche profile picture
Stock up nicely today attributed to increase in stock buyback target.

Edward J. Roche profile picture
I checked this morning with Fidelity on details of the transfer. Fidelity spoke directly with Ali Couche Tard. There is a delay with the Transfer Agent but they expect the new A shares to come through in the next few days. That would apply to the ATD shares (Toronto Exchange). With regard to ANCUF there will be a one for one transfer to ANCTF. Not sure of the timing there. There has been some spurious trading in ANCUF yesterday and today with the shares dropping 10% or so at times. This appears to be due to some foolish sellers. I will not be selling any shares of ANCUF at a discount.
Erik Poole profile picture
@Edward J. Roche Neither here nor there but right now our former ATD.b shares are showing as ANCUF in our Canadian dollar accounts.

I reckon everything will eventually get sorted.

Nice to see the ATD.to shares boot up over the 52-week/lifetime highs earlier this morning. This despite the hysteria surrounding the Omicron variant.
Edward J. Roche profile picture
Rest of the article:

The four will still control a sizable number of shares, but no longer have the voting clout to unilaterally block any takeover bids or shareholder actions they dislike.

The issue of multiple-voting shares has come under renewed scrutiny because of the family battle at Rogers Communications Inc. which is controlled by the Rogers family through the company’s dual-class share structure.
@Edward J. Roche Thanks for sharing! A guy in Omaha would be a great buyer of these assets and let them keep running the company!
Edward J. Roche profile picture
Dual class structure ends. Let's see what happens.


LAVAL, Que. - Convenience store giant Alimentation Couche-Tard Inc. is winding up its dual-class share structure this week.

The Quebec-based company will convert all of its outstanding class B shares to class A shares on a one-for-one basis as of Wednesday trading, earlier than previously indicated.

A so-called sunset clause was put in place in 1995 to bring an end to the dual-class share structure when the youngest of the company founders turns 65 or dies.

The clause is triggered Wednesday with the birthday of the youngest founder, Jacques D’Amours.

The class A shares owned by the four founders — D’Amours, Alain Bouchard, Richard Fortin and Réal Plourde — carry 10 votes per share while class B shares carry one vote per share.

Bouchard, who is executive chairman of the board, says the four founders will remain directors and closely involved in the organization.

“My commitment and leadership of the business will not change, and I am more confident than ever before that our size, our winning culture and strategy, and the structures that we have put in place, both at the executive management level and from a governance standpoint, will serve the business well,” he said in a statement.

The four founders unsuccessfully tried to extend their voting rights in 2016, but a shareholder vote on the proposal was cancelled after they concluded two-thirds support from subordinate shareholders wasn’t possible.
teemacsj profile picture
Anybody take in the Investor Day on Wednesday - I thought overall, pretty impressive.
Erik Poole profile picture
@teemacsj Did not follow but quickly read the 112 page PDF file.

Nothing short of impressive. The time series charts are visually striking. Love the way the market responded with a 5%+ lift to the share price.

What I really appreciate about this company is not only the potential for on-going global growth to drive up the share price but also the potential for the market to pay a substantially higher management/performance premium for Couche-Tard.

Now definitely over portfolio weight. What to do? Average up? (Which I often do on positive news and is exactly what I did after the Carrefour deal fell apart.) Sell down now? Wait to sell down a few?

This is a much nicer problem to have than figuring out how and when to sell losers.
Dollarman1971 profile picture
@Erik Poole Sell some while you are positive. Respected MM let some profits go when the wind is in their sails.
teemacsj profile picture
Activity on the NCIB continues at unprecedented levels - according to regulatory filings, ATD spent CAD $696MM to repurchase 17.4MM shares in Fiscal Q4 (-3.0% year over year). With the exception of three days around the Fiscal Q3 release mid-March, the company maintained daily activity on its NCIB thru fiscal Q4. After completing the previous 4% annual program in about 5 months, the company renewed its NCIB for an additional 4% of the float beginning April 26.
Main_Street profile picture
Thank you for the article. I was not aware of this company but after reading the article and doing more research, I pulled the trigger today and bought some shares.
teemacsj profile picture
Decent quarterly results today. Notably, since Nov they have repurchased almost 2% of their outstanding float. $900MM
Edward J. Roche profile picture
@teemacsj Clearly large covid effects particularly in Canada, Europe with lockdowns/curfews. Also some weather effects in mid-west US, Texas where stores were closed with no power.

Just listened to the cc. No big changes in strategy. M&A strategy remains focused on US, Asia. Valuations not right currently.

They like what they are seeing with Fire & Flower.

Share buybacks impressive. Clearly they think the stock is cheap.
No change in my overall views that is great value in an expensive overall market. Company could be the target of take over when the ownership structure changes.
teemacsj profile picture
@Edward J. Roche Be interested to hear more about your thoughts re takeover. Other than Berkshire, who do you think would approach them?
Edward J. Roche profile picture
@teemacsj Private equity would be most likely in my view.
Edward J. Roche profile picture
My Interactive Brokers report shows an analyst upgrade today. Cannot find which analyst...Stock up in a down/mixed market.
Keubiko profile picture
@Edward J. Roche "Couche-Tard raised to overweight from neutral at JPMorgan on “misaligned” valuations in the fuel retail and convenience store sector." $C52 target price.
Edward J. Roche profile picture
Some interesting comments in the Autozone conference call yesterday on how fast the EV market will grow:

"First of all, consumer adoption is uncertain. We - roughly 2% of the market today and it's growing slowly. And if you look at the U.S. in particular, the charging infrastructure is not ready for prime time. The rapid charging stations need to be built out. It's going to be expensive. It's probably going to take some combination of public and private partnerships."

So they see it perhaps as slower than many others.
Edward J. Roche profile picture
Couche Tard increasing its stake in Fire and Flower - news out this morning.

Proposed $52 million conversion will significantly improve balance sheet, reduce interest costs and bring Circle K owner, Alimentation Couche-Tard, up to 19.9% equity stake

It appears they like what they are seeing...
teemacsj profile picture
@Edward J. Roche Thanks for posting Edward.
Is ANCUF paying a dividend in March 2021? I have looked but cannot find this information anywhere.
Keubiko profile picture
@Jim Investor yes but it hasn't been declared yet. should be declared mid March.
@Keubiko Thanks!
Roses&Thorns profile picture

I am happy to have found this article. I have been a shareholder since 2018 and love their dividend growth. It is a large stable core holding for me.

I often wonder, why is it otc?

Maybe its nothing more than the owners don't want to list in the US?

Why wouldn't they want to uplist?

This is something I would like to understand more.
Edward J. Roche profile picture

@SittingunderThanks for reading and your comments. I have asked their Investor Relations about this and I have suggested that a NASDAQ listing would greatly expand the shareholder base and probably increase the market cap. I have not gotten a clear answer from them. I think there may be some historical reasons to have the main listing on the Toronto Canada exchange. I also think that control is another possible consideration.

Keubiko profile picture
@Sittingunder it's only OTC in the U.S because the main listing is on the Toronto Stock Exchange. It's very liquid trading over 2.5 million shares per day on average.

I'm not 100% certain but I think the dual class share structure may be a problem for a non-U.S. company. That structure falls away later this year. I think a U.S. listing makes sense. I'm long gobs of this thing.
@Sittingunder Level 2/3 ADR costs more and it also has higher accounting requirements. Only the company could tell you the true reason. Inertia probably plays a role, it doesn't seem like the controllers care about the short term share price.

Edward J. Roche profile picture

Warren Buffett received a copy of "Daring to Succeed: in 2016. He commented that he knew of the company and knew that it was becoming a player in the US.

connjoltrane profile picture
@Edward J. Roche As an owner of Berkshire and Alimentation Couche-Tard, I think it would be a perfect fit!
Dollarman1971 profile picture

First of me hearing about it but it is on my radar. Hopefully a quick market pullback gets me in the door. That would be 'convenient'.

Keubiko profile picture

I'd be lying if I said I didn't own gobs of this.

@Keubiko Long as well. Great company. Still haven’t tried those hotdogs though..
Edward J. Roche profile picture
An interesting piece from Forbes on the history of Berkshire buying family businesses:


Berkshire has one further advantage that has become increasingly important over the years: We are now the home of choice for the owners and managers of many outstanding businesses.

Families that own successful businesses have multiple options when they contemplate sale. Frequently, the best decision is to do nothing. There are worse things in life than having a prosperous business that one understands well. But sitting tight is seldom recommended by Wall Street. (Don’t ask the barber whether you need a haircut.)

When one part of a family wishes to sell while others wish to continue, a public offering often makes sense. But, when owners wish to cash out entirely, they usually consider one of two paths.

The first is sale to a competitor who is salivating at the possibility of wringing “synergies” from the combining of the two companies. This buyer invariably contemplates getting rid of large numbers of the seller’s associates, the very people who have helped the owner build his business. A caring owner, however – and there are plenty of them – usually does not want to leave his long-time associates sadly singing the old country song: “She got the goldmine, I got the shaft.”

The second choice for sellers is the Wall Street buyer. For some years, these purchasers accurately called themselves “leveraged buyout firms.” When that term got a bad name in the early 1990s – remember RJR and Barbarians at the Gate? – these buyers hastily relabeled themselves “private-equity.

The name may have changed but that was all: Equity is dramatically reduced and debt is piled on in virtually all private-equity purchases. Indeed, the amount that a private-equity purchaser offers to the seller is in part determined by the buyer assessing the maximum amount of debt that can be placed on the acquired company.

Later, if things go well and equity begins to build, leveraged buy-out shops will often seek to re-leverage with new borrowings. They then typically use part of the proceeds to pay a huge dividend that drives equity sharply downward, sometimes even to a negative figure.

In truth, “equity” is a dirty word for many private-equity buyers; what they love is debt. And, because debt is currently so inexpensive, these buyers can frequently pay top dollar. Later, the business will be resold, often to another leveraged buyer. In effect, the business becomes a piece of merchandise.

Berkshire offers a third choice to the business owner who wishes to sell: a permanent home, in which the company’s people and culture will be retained (though, occasionally, management changes will be needed). Beyond that, any business we acquire dramatically increases its financial strength and ability to grow. Its days of dealing with banks and Wall Street analysts are also forever ended.

Could this happen with Couche Tard? We shall see....
teemacsj profile picture
@Edward J. Roche Thanks Edward. I for one, would love to see something like this happen for all my clients that have been long time owners of Couche Tard.
Erik Poole profile picture

@Edward J. Roche Nice sentiment but I do not see Berkshire buying Couche Tard. The company has had all kinds of success raising capital for expansion both internally and externally. The company also seems to have a reasonably good handle on this often elusive talent called 'marketing'.

Are there areas of operation where Berkshire could show Couche Tard how to better do things? The Holy Grail of foreign direct investment and large corporate buyouts are technology transfers. In this particular case, how would Berkshire improve operating efficiencies in ways that currently escape Couche Tard management?

Moreover, la nation québécoise would not politically stand for it unless Berkshire restricted itself to a minority controlling shareholder position.

It would be nice to see shareholders of Couche Tard rewarded with US-style valuations but then maybe some of us bought the stock precisely because it does not exhibit US-style nose-bleed valuations.

Sometimes the tortoise beats the hare.


I should point out that in general, American firms stand head over heels above the international competition, including Canada, in this challenging area called 'marketing'. So in many cases, the American buyer would bring solid skills to the table. I am not convinced that is the case here.

Then there is the current dismal state of the American Brand. I would worry that American owners would jeopardize Couche Tard operations outside of the USA.
Edward J. Roche profile picture

@Erik PooleI think that the whole concept of a Berkshire buyout is to let the company management and practices stay in place. Berkshire does not want to ruin a great company. Right now Bouchard is looking at a stock that is 30-50% undervalued. How can he get the full value?

Money Talks! profile picture
I bought shares today after the dip. I had sold at a small profit a while before because I was too heavily margined and regretted it when I saw the shares spike. I liquidated a stock in my TSFA and re-bought into it as I am convinced that Couche-Tard is a super good buy at this price. I fail to understand why it has not year gone back to at least 45$ Canadian?
Edward J. Roche profile picture
Barrons put out a piece today saying it was time to buy Casey's (CASY).


But Couche Tard is so much cheaper and has had better growth than CASY....
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