March 28, 2024 9:29 PM

CrossAmerica, Alimentation Couche-Tard products establish Canada’s sustainable oil and gas industries

Alimentary Couche-Tard and CrossAmerica create a win/win business deal that offers cleaner gas products for the Northern and Southern regions of North America.

/ Published 5 years ago

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An underlying foundation of both the Canadian and American economies developed from oil and gas exploration. Economies need energy sources to function as it goes about daily business tasks. Most people never realize the wheeling and dealing it takes or the infrastructure to get gasoline to their homes and vehicles.

Commercially, industries often create their own distribution point network to fuel their needs. The oil and gas industry must reveal pipelines to locals in public information brochures to know where to call in case of an explosion or leakage.

Fuel distribution in both countries is more than just an underground network of pipes that criss-cross boundaries distributing oil and gas to communities. The local truckers pick up the oil from the distribution point and transport to local stations. Unless a disaster occurs exposing the operation, it remains hidden and seamless. The pipelines cross-country boundaries. Canadian Atlantic refineries supply the U.S. Eastern Seaboard and the North. Also, the Canadian Keystone pipeline runs from Alberta tar sands to Houston/Port Arthur, Texas.

Gas stations

Just as some pipelines have a mix of Canadian and USA oil so do gas stations. A report by Bloomberg recently described how Alimentation Couche-Tard Inc. (TSX: ATD.A) (TSX: ATD.B) and CrossAmerica Partners LP (NYSE: CAPL.N) created a deal that swapped the assets of convenience stores and gas stations in the USA.

Couche-Tard sold 192 United States fuel and convenience retail stores to CrossAmerica. The aggregate asset value comes to US$184.5 million. CrossAmerica turned around and sold to Couche-Tard a set of real estate properties numbering 56 units in the United States which operate as fuel and convenience retail stores valued at US$184.5 million. The 56 stores owned by CrossAmerica had been operated by and leased to Couche-Tard earlier.

Then CrossAmerica sweetened the deal by adding 17 more stores they owned in the Upper Midwest region of the USA. It remains a complicated deal due to the fact that it occurs between two entities in two different countries and the fact that the oil and gas industry remains heavily regulated. The timeline on the transaction lists as around 24 months and will take a series of phases.

Shielded

Despite the deal’s complication the benefits for both companies becomes United States tax laws on limited partnerships shields income sourced from wholesale gas and fuel station leases. CrossAmerica, well aware of such tax laws, has used that to create its two main revenue venues. Its parent company had efficiently used the tax provision to finance new stores with minimal taxation due to lease payments to Cross American GP. Maneuvering into this recent transaction started in 2017.

The maneuver

CST Brands owned CrossAmerica Partners LP through its ownership of its partner CrossAmerica GP which also a gas and convenience company till 2017. Then Couche-Tard bought CST Brands for US$4.4 billion. So CrossAmerica GP later became a subsidiary of Couche-Tard of Canada.

Rather than the usual winner-loser scenario, the two companies created a win-win situation. For consumers, it means they continue to receive the gas and retail services they like in both countries. Some disruptions to usual industry practices have positive effects and may become a business model for certain types of acquisitions.

Gas Canadian style

oil
Canadian oil and gas now come down pipelines into the USA all the way to Houston refineries. (Source)

The largest independent convenience store operator in the United States for years lists as Couche-Tard if defined in terms of a number of company-operated stores. The network of Couche-Tard in North America has 9,943 stores. Of those, 8,660 have road transportation fuel. In the U.S., 15 of the 19 business units appear in 48 states. The remaining units will fuel Canada in all ten provinces. This dispensing of fuel will increase with the CrossAmerica deals.

Couche-Tard resides under a variety of brands under the Cross America Partners LP label at 1,300 locations in the USA.

Politics by expenditure

Spending money on products that support policies an ordinary person agrees with could become accomplished by an ordinary citizen just by purchasing gas. Canada with its oil and gas industry has subjected them to sustainable development mandates. The oil and gas products created by Couche-Tard house under a variety of brand names but some of the familiar one’s lists as Circle K. More and Mac’s Convenience stores will pretty soon rebrand as Circle K.

Canada has major Sustainable Development projects in the works mandated by law including its energy sector and oil gas industry. Buying gas created in Canada supports environmental initiatives. On the CSRHUB of corporate social responsibility and environmental social governance metrics, Couche-Tard ranks 38 as compared with 18,621 other companies.

If consumers use purchasing power to support oil and gas outlets that come up with innovative sustainable development processes, it leaves a cleaner environment for their children and grandchildren. It also forces other oil and gas industries to do the same and these companies not only provide better gas services, but they also get to earn a significant profit as well.

(Featured photo by shannonpatrick via Wikipedia. CC By 2.0)

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