Alimentation Couche-Tard Calls Żabka Deal Its Largest, Most Transformational Acquisition

Key Points

• Alimentation Couche-Tard called its agreement to acquire a controlling stake in Poland’s Żabka Group the largest and most transformational deal in its history, adding roughly 13,000 stores and 4.3 million daily transactions to its convenience retail platform.
• Żabka contributes a fast-growing franchise network, strong food and digital businesses, and an integrated supply chain. Couche-Tard expects more than $250 million in annual synergies by the third year after closing.
• The all-debt transaction is expected to raise leverage to about three times net debt to EBITDA, dilute earnings in the first year, and become accretive in the second year. Couche-Tard anticipates closing in December, subject to its tender offer and ownership outcome.

Alimentation Couche-Tard TSE: ATD said its agreement to acquire a controlling stake in Poland’s Żabka Group represents the largest acquisition in the company’s history and a major step in its “Core Plus More” growth strategy.

President and Chief Executive Officer Alex Miller described the transaction as a “transformational investment” that combines two convenience retail businesses with complementary strengths in food, digital engagement, supply chain, loyalty programs and innovation. Żabka operates about 13,000 stores and processes roughly 4.3 million transactions daily, according to Couche-Tard.

“We are not simply acquiring a store network,” Miller said. “We are adding a differentiated platform with strengths that directly complement and advance Core Plus More.”

Żabka’s Growth Platform

Żabka is Poland’s leading convenience retailer and generates approximately $7.4 billion in revenue, $1.1 billion in adjusted EBITDA and $300 million in net profit, Couche-Tard Chief Financial Officer Filipe da Silva said. The company’s franchise model supports what Couche-Tard characterized as attractive unit economics, cash generation and scalability.

The Polish retailer has expanded its food and digital offerings substantially. More than 10 million customers engage with its digital ecosystem annually, and about one in five transactions includes a Quick Meal Solutions product, according to Miller. Żabka sells more than 16 million pizzas annually and has developed proprietary food offerings alongside its traditional convenience assortment.

The company also runs an integrated logistics network, managing about 99% of store distribution through its own system. Its supply chain includes eight distribution centers and 19 cross-docking facilities, with more than 90% of replenishment automated.

Tomasz Blicharski, Żabka’s group chief strategy and development officer and incoming CEO, said the retailer has delivered double-digit top-line growth throughout its 28-year history and has consistently increased EBITDA. He said Żabka continued opening stores and growing through the COVID-19 pandemic, high inflation and an energy crisis.

Żabka opened more than 1,300 stores last year and expects to open a similar number this year, above its earlier target of about 1,000 annual openings. Blicharski said the company’s growth has been approximately 99% organic, driven by comparable-store sales and new-store development rather than acquisitions.

In Poland, Blicharski said Żabka has close to 13,000 modern convenience stores, while Carrefour, its next-largest named competitor in the segment, has fewer than 500 stores and is not opening new locations. He also cited an estimated 40,000 to 50,000 independent mom-and-pop stores in the market.

Deal Structure and Financial Outlook

Couche-Tard said it has irrevocable commitments representing 57% of Żabka’s shares. The company plans to launch a voluntary tender offer, though executives said the ultimate ownership level and timing remain uncertain. If Couche-Tard reaches a 95% ownership threshold, it could delist Żabka; otherwise, Żabka could continue operating as a public company in Poland.

Miller said the companies expect to close the transaction in December and will use the intervening period to establish priorities. He emphasized that Couche-Tard does not view the process as a traditional integration, but rather as an opportunity to share capabilities between the organizations.

The transaction will be fully financed through debt, da Silva said. Couche-Tard expects leverage to rise to about three times net debt to EBITDA following closing, before returning to its stated range of two to 2.5 times by the second year after closing.

On a pro forma basis, excluding synergies, the combined company would have nearly $84 billion in revenue and about $7.8 billion in adjusted EBITDA, Couche-Tard said.

The company identified more than $250 million in run-rate cost and revenue synergies, expected to be fully achieved by the third year following closing. Opportunities include procurement, logistics, private label, food programs, loyalty, digital data and technology. Executives said the synergy plan assumes a gradual ramp-up because the final ownership stake remains unknown.

Couche-Tard expects the deal to dilute earnings per share in the first year due to acquisition costs, higher depreciation and financing expenses, but become accretive in the second year after closing. It expects return on invested capital to reach double digits by the third year after closing.

Capabilities for Poland and Beyond

Miller said Couche-Tard sees opportunities to apply Żabka’s practices across its European and North American businesses. He highlighted Żabka’s food preparation and procurement model, ready-to-serve meals, private-label programs, supply-chain control and digital tools as areas with potential broader application.

Couche-Tard also operates nearly 400 Circle K locations in Poland and said Żabka’s food, supply-chain and digital capabilities could create value within that network.

Żabka has also begun international expansion, entering Romania in 2024. The business has reached 250 Romanian stores and sees a long-term opportunity for roughly 7,000 locations in that market, Blicharski said. Its “new growth engines” segment also includes e-commerce, rapid delivery and a meal-subscription business supported by its vertically integrated meal production.

“Becoming part of the Couche-Tard family gives us access to a broader global platform, additional expertise and new opportunities to accelerate the growth further,” Blicharski said.

About Alimentation Couche-Tard (TSE:ATD)

Alimentation Couche-Tard Inc operates a network of convenience stores across North America, Ireland, Scandinavia, Poland, the Baltics, and Russia. The company primarily generates income through the sale of tobacco products, groceries, beverages, fresh food, quick service restaurants, car wash services, other retail products and services, road transportation fuel, stationary energy, marine fuel, and chemicals. In addition, the company operates more stores under the Circle K banner in other countries such as China, Egypt, and Malaysia.

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