/The billionaire behind the $10b Caltex bid

The billionaire behind the $10b Caltex bid

Aggressive targets

If the takeover does succeed, ACT will be well on the way to achieving its promise it made in 2019 to double its financial results by 2023.

Under Bouchard’s leadership as CEO until 2014 ACT always had aggressive targets. According to Daring to Succeed, a book about Bouchard’s life by Canadian journalist Guy Gendron, the first question from journalists whenever the company pulled off a new deal was: “What are you going to buy next?”

Bouchard was never shy about sticking new growth stakes in the ground. At one famous press conference he declared the relatively small Canadian company would double its size through acquisitions in the United States. It subsequently did so.

The ACT team … usually end up knowing more about the business being targeted than the executives who have been running it.

Through expansion by acquisition and organic growth ACT now has 16,100 global sites, 160,000 employees and annual sales of $C57 billion ($63 billion).

Its stores are mainly company-owned and trade under the Circle K brand in 26 countries including New Zealand. Only Quebec has retained the Couche-Tard brand name.

The ACT team, and Bouchard in particular, are master negotiators who usually end up knowing more about the business being targeted than the executives who have been running it.

ACT executives always make secret visits to the convenience store networks they are about to buy, according to Gendron’s book.

No matter where in the world the project is, it must meet his personal approval.

The Canadians usually arrive unannounced, talk to staff, examine the store layouts, check the stock and work out in a short space of time how much more profitable a network of stores would be under their disciplined financial management and creative marketing.

Gendron’s book sets out details of the scores of times, Bouchard and his fellow founders – Richard Fortin, Jacques D’Amours and Real Plourde – bought businesses and rapidly boosted their profitability through efficiency measures, improved supply chain arrangements, better technology systems and economies of scale.

A different deal

But the Caltex bid is proving a troublesome one for ACT. The Caltex share price has soared more than 40 per cent since ACT made its first indicative offer of $32 to the Caltex board in October last year.

The stock closed on Thursday at $35.60 thanks to general market euphoria, expectations of a higher offer and the widespread belief the takeover will unlock the sum of the Caltex parts including $1 billion in franking credits.

There are competing bidders for Caltex but only ACT has made the public commitment to the entire business.

Caltex chairman Steven Gregg. Jessica Hromas

Caltex chairman Steven Gregg has been astute in his dealings with ACT. His refusal to engage with the $32 offer prompted ACT to bid against itself and offer $34.50 a share.

Gregg refused due diligence but did agree to give ACT a presentation which includes non-public information about the prospects of Caltex’s various businesses. Handing over inside information to the Canadians required standstill agreements to be signed.

Chanticleer understands Caltex’s 140-page presentation included five-year financial forecasts for each of the Caltex businesses. ACT was smart enough to bring in executives in Europe involved in fuel distribution.

The teams from Caltex and ACT will be back tomorrow for further discussions.

Strict personal criteria

Bouchard’s presence at the meeting in Herbert Smith Freehills office was in keeping with a pact he made to Hannasch in 2014 which is detailed in Gendron’s book.

Gendron said that when Bouchard became executive chairman he was given the role of checking every acquisition, no matter where it is in the world. Bouchard, Gendron wrote, retains control over the selection of new locations and store construction and renovation projects.

“No matter where in the world the project is, it must meet his personal approval and respect the very strict criteria on based on the model he created,” Gendron wrote.

Bouchard lives and breathes convenience stores and loves visiting his company’s outlets to talk to staff and learn ways of fulfilling his original vision which remains to this day: “to make our customers’ lives easier by offering them the products they need when they need them”.

Expansion in the Asia Pacific is very important to the company judging from a statement issued in November by Hannasch when the bid for Caltex was made public.

“We believe this is a very compelling offer for Caltex shareholders, representing an excellent premium and certainty of value today,” he said.

“ACT’s management team has been looking into the Asia-Pacific region for several years as a potential market for our continued growth and we see many opportunities.

“With Caltex, we see a potential opportunity to leverage our leading global position in the convenience retail market, and we would seek to bring all our operating expertise to bear to help support and grow the Caltex business.

“Importantly for Caltex’s customers, partners and staff, we are a committed buyer of the entire Caltex business.”

A front row seat

Bouchard laid out his vision and ACT’s refreshed strategy in a letter to shareholders in the company’s latest annual report.

“Over time, we have seized opportunities to grow the business, relying on our customary financial discipline – embedded in our DNA – and always focusing on creating value for our shareholders and employees,” he said.

“We have grown from our convenience-only roots into one of the world’s leading merchandise and fuel destinations, never taking our eye off serving our customers and growing organically.

“We have also brought many tremendous assets into the network from across North America and Europe, leveraged by our merger and acquisition activities, in order to better serve our global customers.”

ACT’s strategic expansion into Norway has given the company a front-row seat at the transition from petrol-driven cars to electric cars. Electric charging stations are a fact of life in Norway.