It’s time to buy this stock before the unthinkable happens

Canadian investors are familiar with Diet Couche-Tard (OTCMKTS:ANCTF), a Montreal-based convenience store owner and industry consolidator. It has grown from one shop in 1980 to 16,740 worldwideincluding 7,131 in the US

Its DNA is in mergers and acquisitions. So many have been made over the years that it’s hard to keep track. His latest acquisition was also his biggest. In 2023, it paid $4.4 billion for about 2,200 locations in Europe owned by TotalEnergies (NYSE: TTE), one of the largest oil and gas companies in the world.

On 19 August, Couche-Tard confirmed that he had sent him a friendly offer Seven and i Holdings Co., Ltd. (OTCMKTS:SVNDY), the Japanese owner of 7-Eleven department stores.

Although no figures have been released, the current market cap is approx 38 billion dollars. Couche-Tard would have to pay a significant premium to succeed in a country that generally frowns on significant foreign acquisitions.

Although 7-Eleven has far more stores — 85,000 worldwide, or five times as many as Couche-Tard — Canadians have a much larger market cap.

Regardless of whether Couche-Tard is successful, Americans may want to consider buying its stock before the outcome is decided.

Here’s why.

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• It will need to find debt and equity investors.
• Warren Buffett would make a good sugar daddy.
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Greater investor interest should boost its share price

Two investors looking at a stock chart on a computer screen

Despite being the world’s second-largest convenience store owner behind 7-Eleven, Couche-Tard isn’t a household name with many investors outside of Canada. That’s true even though he’s made more than 10 acquisitions south of the border in the US

If you own an independent convenience store chain somewhere in the world, you know who the company is. However, outside of the industry, this is not the case.

Whether or not this massive undertaking is successful, the company will gain significant exposure and receive huge amounts of free publicity in investor relations. Ultimately, I believe this will lead to the company’s listing in the US, perhaps even delisting from the Toronto Stock Exchange, as Lululemon (NASDAQ:LULU) did many years ago.

With or without 7-Eleven, the exposure should push its shares higher.

Couche-Tard will pay for the deal with new debt and equity

A pencil that erases the word debt

Couche-Tard, according to sources close to the situation, the company plans to pay for the acquisition by issuing a large amount of debt and through new equity funds from some of the pensions that own its stock.

If anyone can pull this off, it’s its founder, Alain Bouchard, who serves as chairman, and Brian Hannasch, the longtime American CEO.

“A leveraged buyout of the Japanese company would be feasible because of its strong cash flow, which will help pay down debt quickly, said the people, who asked not to be identified because the information is not public,” Financial reported Post from Canada. on August 26.

“Seven & i generated ¥335.6 billion ($2.4 billion) in cash in its last fiscal year, about double the global average, according to data compiled by Bloomberg.”

One thing that Couche-Tard is very good at is the integration of purchases, including quick debt settlement. He has a long history of success in this regard, so you should not bet against his success.

It has also successfully divested assets in previous acquisitions that regulators required divested as part of the approval process. I’m sure he will, within reason, do whatever the Japanese regulators ask to complete the deal.

But first, he has to get his ducks in a row.

A surprise investor for transaction financing

A picture of Warren Buffett

There is an investor with deep pockets who is familiar with helping finance large acquisitions. Conveniently, this investor has plenty of cash on hand to do this quickly.

I’m talking about Warren Buffett, whose Berkshire Hathaway (NYSE:BRK.B) just became the eighth trillion dollar company. As of June 30, Berkshire had $277 billion in cash on its balance sheet, more than enough to help Couche-Tard finance its business.

Two other things about Buffett that don’t hurt.

First of all, he is a big fan of Japanese companies. He owns between 7.5% and 8.6% of five of the country’s largest conglomerates, known as trading houses. He plans to hold on indefinitely though.

Second, Berkshire owns Pilot Travel Centers, acquiring the last 20% in January for $2.6 billion. Pilot has 650 travel centers and 75 fuel locations in 44 US states and five Canadian provinces, primarily under the Pilot or Flying J names.

The man understands the industry. It also doesn’t hurt that he loves Cherry Coke. He probably wouldn’t mind an occasional Cherry Slurpee as part of his compensation for helping out.

However, at Berkshire’s annual meeting in May in Omaha, Buffett hinted that the company was considering investing in a Canadian company.

“We don’t feel uncomfortable in any way and we don’t put our money in Canada,” CNBC said reported his comments from the meeting. “We’re actually looking at just one thing right now.”

I’m not suggesting that Couche-Tard is “the one,” but the timing certainly seems right for him to participate in any attempted takeover of Seven & i Holdings.

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