• CST unveiled the Corner Store Market brand, which focused on fresh food and groceries, in November 2015. Photo: San Antonio Express-News File Photo / San Antonio Express-News
Photo: San Antonio Express-News File Photo
 
 
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CST unveiled the Corner Store Market brand, which focused on fresh food and groceries, in November 2015.
 
Quebec-based Alimentation Couche-Tard, the parent company of Circle K, closed its $4.4 billion merger with CST Brands Inc. on Wednesday.
CST Brands immediately became a Fortune 500 company upon spinning off from Valero Energy Corp. in 2013. The $3.7 billion convenience store operator became known for its ambitious expansion efforts and its focus on fresh food offerings, but came under fire from activist investors who thought it wasn’t creating enough value to offset shareholder concerns about its mounting debt.
 
CEO Kim Lubel, who led CST from its inception through the merger, announced Wednesday that the closing of the deal would be her last day with the company. “While bittersweet for me, I have been blessed to work with an incredible team,” Lubel said in a statement provided by Couche-Tard. “We have accomplished so much and had a lot of fun along the way.”
The CST acquisition, valued at $48.53 a share, is a big get for Couche-Tard’s fleet.

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After selling off more that 200 stores to satisfy antitrust regulators in the U.S. and Canada, Couche-Tard will have gained more than 1,300 stores in both countries via the sale, expanding its footprint to almost 9,500 locations including 666 in Texas. CST’s Corner Stores eventually will be branded Circle K.
Couche-Tard is in a “race to the top” against 7-Eleven Inc. for consolidating the convenience store market, said Jeff Lenard, a spokesman for the National Association of Convenience Stores.
 
The Irving-based convenience store chain reached 9,815 stores in the U.S. and Canada after agreeing to purchase 1,108 stores from Sunoco for $3.3 billion in April. “They have both been very aggressive on acquisitions,” Lenard said. “They are almost neck-and-neck now, where one transaction may push Couche-Tard past 7-Eleven.”
Couche-Tard Inc. agreed to purchase CST Brands, which operates the Corner Store chain of convenience stores, in an all-cash transaction in August. As part of the deal, Couche-Tard will assume CST’s debt, which stood at $2.5 billion as of March 31.
“In CST, we acquire a company with strategic value that will efficiently complement our network,” Couche-Tard CEO Brian Hannasch said in a statement. “We bring in great new locations as well as expertise and experience which are likely to allow us to venture into new opportunities.”
Acquiring CST also gives Couche-Tard a leg up in the convenience store industry’s shift toward in-store sales of fresh food. Under Lubel’s leadership, CST sought to insulate itself from volatile gas prices and falling cigarette sales by increasingly offering freshly prepared food items and groceries at its convenience stores and unveiled a separate brand, Corner Store Market, specifically focusing on fresh food.
The efforts by CST seemed to pay off. The convenience store operator made $164 million from merchandise and services during the first quarter of this year, a 2.5 percent boost from $160 million earned during the same period in 2016.
Meanwhile, CST made $112 million from fuel sales during the three-month period ended March 31 compared with $120 million during the same timeframe last year.
“That’s a big part of the move forward: less about fuel, more about food,” Lenard said.
Couche-Tard plans to run its largest U.S. operation from CST’s former 559,258-square-foot headquarters at 19500 Bulverde Road on the North Side, which will manage the Texas stores including 170 in San Antonio.
To meet antitrust requirements from U.S. and Canadian regulators, Couche-Tard agreed to sell CST’s headquarters in Montreal along with 159 Corner Stores in Canada to Parkland Fuel Corp. and 70 Corner Stores in the U.S. — including 19 in Texas — to Dallas-based fuel distributor Empire Petroleum Partners.
Three former CST executives — Stéphane Trudel, senior vice president of growth and strategy; Steve Lattig, vice president of integration and development operations; and Jeff Truman, vice president of regional retail operations — will run three of Couche-Tard’s divisions in the U.S. and Canada, the company said Wednesday.
In addition to Lubel, CST’s top four executives also will be leaving the company.
Lubel could get a big payout from her departure. According to a filing with the U.S. Securities and Exchange Commission, the former CEO could receive about $13.4 million in severance pay, benefits and restricted stock and options in connection with the merger.
CST, in addition to salaries and health benefits, compensates its executive officers through short-term cash incentives tied to performance and through long-term incentives of stock options and restricted stock units, which vest in equal increments over three years, federal filings show. A so-called change-in-control of the company accelerates the vesting schedule, allowing executives to cash out previously unvested options and restricted stock.
Under those change-of-control provisions, the other departing executives are entitled to receive a windfall of $13.6 million from the acquisition if they have been ousted or have resigned “for good reason” since they are leaving within two years of the merger.
Chief Financial Officer Clayton E. Killinger stands to make almost $6 million; Hal Adams, president of retail operations, $2.8 million; Anthony Bartys, chief operating officer and senior vice president, $2.3 million; and Gérard Sonnier, senior vice president, general counsel and corporate secretary, $2.6 million.