Irving Oil, Couche-Tard Inc. expand partnership into N.B.
Changes ahead | 128 Irving Oil convenience stores in Atlantic Canada will bare new Circle K and Mac's banners by the end of summer
HALIFAX - Irving Oil Ltd. is shifting the operation of 252 of its convenience stores to Alimentation Couche-Tard Inc. - allowing the Quebec company to push into the U.S. northeast and giving New Brunswick's Irving family a timely injection of cash.
Couche-Tard Inc. announced Thursday the new arrangement means it will lease and operate the convenience stores at key sites in Atlantic Canada and New England.
It'll be a major and visible shift along the highways of the regions, with hundreds of Blue Canoe and Mainway signs coming down by the end of the summer. The familiar Big Stops will remain under Irving control.
In a conference call, analysts were curious about the reasons behind the deal, given that it's only been a few years since Irving spent millions of dollars rebranding many of its convenience stores to Blue Canoe.
Harry Hadiaris, a marketing director at Irving Oil, responded that the family company gains an advantage by specializing in selling petroleum products, while Couche-Tard hopes to grow in the U.S. market using its skills as a retailer.
Through past acquisitions, Couche-Tard is already a major convenience store operator in several parts of the United States through its Circle K brand. The company employs 45,000 people and operates nearly 5,700 convenience stores across North America, including 3,440 gas bars.
"We think this a marriage made in retail convenience (store) heaven," Hadiaris said.
Meanwhile, Michel Bernard, vice-president of Eastern Canada operations at Couche-Tard, said his company "plans some growth" in the U.S. market as a result of the deal.
However, an industry veteran argues the arrangement is also driven by the Irving family's desire to raise cash needed to pay for the division of the conglomerate among the families of the three aging brothers.
Dave Collins, vice-president of Wilson Fuel Ltd. - the largest independent gasoline retailer in Atlantic Canada - said he can't imagine why else the family company would be making the change.
"You're talking about a drastic change in the culture of these (Irving) operations, and you don't do that if you're not losing money, and I'll guarantee you one thing, those stores they have weren't losing money," he said.
"It's to raise cash, the family has talked about splitting up and it's a great way to raise money to buy out various cousins and uncles."
In November, a spokeswoman for J.D. Irving Ltd. said that the Irving companies are involved in succession planning, and noted it's been underway for some time.
"Succession planning is a normal and necessary process in any family business," Mary Keith had told The Canadian Press.
Collins described the Couche-Tard deal as "sales leaseback," where the Quebec firm would provide Irving with a lump sum at the front of the deal, along with regular payments.
However, Bernard wouldn't confirm if an up-front payment was made, and said all the figures are sealed by a confidentiality agreement.
By the end of this summer, the result will be some big changes in the look of roadside stores across Atlantic Canada, with the Couche-Tard, Circle K and Mac's brands replacing the old Irving symbols.
Of the 252 Irving Oil stores involved in the new agreement, 128 are in New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island. The other 124 are in Maine, New Hampshire, Massachusetts and Vermont.
Irving Oil will keep ownership of the properties and supply gasoline and petroleum products to them. Couche-Tard will have 20-year leases and run the stores under its banners, while the fuel pumps will remain Irving-branded.
It's unclear how the deal will affect employees.
Bernard was vague on whether there will be salary reductions or job losses, saying only that over time his company will look for cost savings.
"Those sites are well operated today and profitable. There will probably be some synergy, but it will be more on a long-term basis," he said.
"We will start to operate them as they are right now and evaluate the opportunity."
Asked if there will be a change in staffing, Hadiaris responded, "that at the time of close, site level employees will, in most cases, be transitioned to Couche Tard."
However, he would not say if the company will keep the same number of employees.
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