Couche-Tard president Alain Bouchard outside a store in Blainville, Quebec on May 29, 2019. For the first time in an illustrious 44-year career, investors should be asking if Mr. Bouchard risks overpaying to grab a long-coveted prize.
The takeover could also be a financial disaster if Couche-Tard takes on too much debt. For the first time in an illustrious 44-year career, investors should be asking if Mr. Bouchard risks overpaying to grab a long-coveted prize.7-Eleven for two decades, intent on creating the world’s largest chain of corner stores. He’s never been able to get the Japanese company’s board to engage in takeover talks.
Mr. Da Silva has reason to be confident. Couche Tard is a cash-generating machine, and it would be borrowing at a point in the credit cycle when interest rates are falling. This year, RBC Capital Markets analyst Irene Nattel projects the chain’s 16,000 stores will ring up $7.1-billion of EBITDA. By 2028, the company forecasts EBITDA will hit $10-billion. That much cash can cover interest payments on a whole lot of debt.
However, those with long memories can recall Canadian entrepreneurs who blew up their companies by borrowing too much, at the wrong time. In the 1980s, Robert Campeau drove his company into the ground with ill-timed acquisitions of two U.S. department store chains. In the 1990s, Paul Reichmann went bust by getting too deeply into debt at real estate developer Olympia & York.