Metro to Raise $482M in Couche-Tard Sale

MONTREAL — Metro Inc. here has agreed to sell nearly half of its holdings in convenience chain operator Alimentation Couche-Tard, raising speculation the retailer is positioning itself to acquire Safeway Canada.

Metro said Tuesday it was selling 10 million Class B shares in Couche-Tard to a consortium of banks led by BMO Nesbitt Burns for around $482 million (U.S.). Metro, which has invested in Couche-Tard for 25 years, will retain a 17% ownership stake in Couche-Tard, operator of the Circle K chain.

Eric LaFleche, chief executive officer of Metro, said the company decided to monetize its holdings because of the market value of Couche-Tard relative to Metro’s own value. “We are evaluating opportunities for the use of proceeds, including investments for growth and returns to shareholders," LaFleche said in a statement.

Read more: Loblaw REIT Spurs Debate on Safeway Canada

Karen Short, an analyst following Safeway for BMO Capital Markets in New York, in a research note Wednesday suggested the decision may have been motivated by a need to boost financial flexibility in the event the Pleasanton, Calif.-based retailer decides to sell its holdings in Canada. Loblaw’s recent announcement that it would spin off its real estate assets in a real estate investment trust raised similar speculation, Short noted.

“As it relates to our view of Safeway, we believe a sale of the asset is prudent today given the significant interest in the asset and the potential for a bidding war, but we have no insight as to whether a transaction is imminent, or even likely,” she wrote.

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Metro said Tuesday night that the Couche-Tard sale would be complete in three days. Buyers include BMO Nesbitt Burns, National Bank Financial and TD Securities.

"Metro has been a key shareholder of Couche-Tard since 1987 and we are extremely pleased with the performance of the company," LaFleche said in a statement. "At this time, given the market value of our holding in Couche-Tard relative to Metro's total value, we decided to monetize a portion of our investment. We still retain a significant economic and voting interest in Couche-Tard, and look forward to the continued growth of our investment.”