By OGJ editors
HOUSTON, Oct. 24, 2003 -- ConocoPhillips plans to close in the fourth quarter its sale of Circle K Corp. capital stock to Canadian convenience store retailer Alimentation Couche-Tard Inc.
An agreement for the sale was signed Oct. 6 for assets that include 1,663 retail outlets in 16 states, the Circle K brand, and the franchise relationship with more than 350 Circle K stores. As part of the agreement, ConocoPhillips will continue to supply 1.2 billion gal/year of gasoline for the next 2-5 years at market related pricing.
ConocoPhillips' international marketing assets are not included. To date, the company has completed the sale of its New York and New England marketing assets, and additional asset dispositions are continuing. ConocoPhillips said it would focus on its wholesale business, retaining and operating 300-350 core brand retail outlets—Conoco, Phillips 66, and 76 in the US central and West Coast areas—that complement its refining and transportation network.
"This [Alimentation Couche-Tard Inc. sale] agreement is a significant step toward the planned rationalization of our downstream portfolio," said Jim Nokes, ConocoPhillips executive vice-president of refining, marketing, supply, and transportation, who said the action initiates "a stronger focus on our wholesale channels of trade" and that it "will enable us to reallocate capital to projects that provide higher returns."
Banc of Americas Security analyst Tyler Dann commented that the sale also sets the stage for the company's fourth quarter debt paydown. "We believe that the completion of this transaction will give [ConocoPhillips] some additional momentum in debt reduction during 4Q03. Notably, the transaction also reduces the number of ConocoPhillips' worldwide employees to 38,400 from 55,800, a 31% decrease," Dann said.
It is expected that Alimentation Couche-Tard will hire the majority of displaced ConocoPhillips employees associated with this transaction.
ConocoPhillips said the transaction is not expected to result in any adjustment to the previously recorded impairment provisions related to the company's rationalization plan for its retail marketing assets. Operating results related to the Circle K business will continue to be reflected as discontinued operations until closing.
"The $830MM sale represents roughly half of the retail stores in discontinued operations," Dann said. "We expect the tax impact to be fairly neutral with no substantial gain."
Credit Suisse First Boston acted as exclusive financial advisor to ConocoPhillips in connection with the transaction.
