Analysts at Barclays Capital said on Thursday that Alimentation Couche-Tard’s next European target could potentially be Exxon Mobil’s gas stations in Germany.
Reports on Wednesday said that Exxon Mobil may be considering the sale of the 1,123 gas stations it operates in Germany and that it is in talks with potential buyers in Eastern Europe. A possible sale comes just as Couche-Tard has finished a big European acquisition of its own. The company announced on Friday that it had gained full control of Statoil Fuel & Retail, a network of 2,300 gas stations in Scandinavia and Central and Eastern Europe.
Baryclays analysts point out that during the acquisition of Statoil, Couche-Tard’s management said that expansion into Europe is a priority — and cited Germany as being the main area of focus.
There is one big obstacle facing Couche-Tard if it does go after the Exxon properties. The pursuit of Statoil Fuel & Retail has left Couche-Tard highly leveraged, and the German properties are valued at roughly US$1.3-billion. But previous statements from Couche-Tard suggest a deal would still be possible.
“They [Couche-Tard] have limited borrowing capacity without risking the loss of their investment grade rating, which they have indicated they are prepared to do for the right opportunity,” a team of Barclays analysts wrote in a note. “If this acquisition materializes at this time we believe it would be prudent to issue equity at the expense of immediate term accretion.”
Barclays left its stock rating and price target on Couche-Tard unchanged Thursday. The company’s stock is rated overweight, with a price target of $51.
Earlier this week, RBC hiked its price target on Couche-Tard by 28% to $46 a share, citing the benefits of the Statoil Fuel & Retail acquisition.