(Bloomberg) -- Canada’s Alimentation Couche-Tard Inc. is trying to assure shareholders that management hasn’t lost sight of operations amid fragile talks over a potential takeover of rival Seven & i Holdings Co.
The parent company of the Circle K chain has been pursuing Seven & i for months, bidding almost $50 billion for it, but has been rebuffed. The Japanese owner of 7-Eleven stores has raised concerns over antitrust issues in the US and launched an overhaul of its business, arguing that it can produce better returns over the long run as a standalone company.
Couche-Tard shares are down 13% this year and and have fallen 20% from last year’s highest closing level, as investors weigh the odds of a large acquisition with the evidence of a slowdown in consumer spending.
“It is worth noting that while there has been extensive media coverage, internally a very small team is involved in our efforts concerning Seven and i, as the vast majority of the business is laser-focused on our global operations,” Couche-Tard Chief Executive Officer Alex Miller told analysts Wednesday.
The Laval, Quebec-based company reported financial results that matched analysts’ estimates in the fiscal third quarter ended on Feb. 2, with earnings per share of 68 cents on an adjusted basis, up 4.6% from a year earlier. Revenue was $20.9 billion.
Analysis had revised down their forecasts after seeing bad weather in January and soft results at other companies, Stifel Financial analyst Martin Landry said.
Same-store merchandise revenues decreased by 0.1% in the US, the company’s most important market, and increased by 2.8% in Canada and by 0.2% in Europe and other regions. Same-store fuel volumes were down by 3% in the US and 0.9% in Europe, but rose 3.6% in Canada.
“We continue to see the consumer under pressure, perhaps specifically in the United States, but really everywhere in our geographies,” explained Miller. “There’s a lot of uncertainty out there for us. So we are going to focus on the things we can control, continue to take market share, and be very disciplined with our cost and capital.”
The company’s lower valuation “largely reflects pressures on consumer spending and Seven & i deal uncertainty,” Desjardins Securities analyst Chris Li said in a note to clients. Improvements in merchandise same-store sales growth and clarity on the deal will be “key catalysts” for the stock price, he said.
Couche-Tard’s executives went on a publicity blitz last week in Japan to promote their “friendly and persistent” efforts to buy Seven & i. “We have tried to have meetings,” founder Alain Bouchard told reporters. “It’s hard. Actually, it’s not possible.”
Couche-Tard executives also said that they remain engaged on some potential larger transactions in Europe, as well as in the US, but didn’t give specifics.
Couche-Tard and Seven & I are currently in talks over “a marketing package of what a divestment would look like in the United States,” Miller said, as any merger between the two companies would require the sale of a number of stores for competition reasons. “That marketing program has begun, and there are NDAs being signed by potential buyers in that process.”
He added that a non-disclosure agreement limited to US stores was not signed with Seven & i, contradicting what a spokesperson with the Japanese retailer told Bloomberg News.
After Miller’s comments, Seven & i replied that there is actually “a joint defense agreement in place between our companies for some time that allows for the exchange of confidential information that goes to our consistent threshold issue, which is whether there is a clear path to regulatory clearance.”
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