Four months ago, Alain Bouchard gave an update to investors about Alimentation Couche-Tard Inc.’s hunt for a major acquisition. The convenience store chain was on the lookout for deals, he said, but not at any cost.

“As you know, Couche-Tard doesn’t seek to make a splash,” Bouchard, the executive chairman, said Sept. 16 during the Canadian company’s online annual meeting. “Up to now, our patience and rigor have served us well.”

He may not want a splash, but Bouchard’s company is making one with its US$20 billion move for French grocer Carrefour SA. The acquisition would be about five times the size of its biggest purchase to date and thrust Quebec-based Couche-Tard into large supermarkets, a low-margin corner of the food industry in which it has little experience.

The potential deal is facing scrutiny from the French government, which has expressed opposition but may just be buying time to study the offer once it’s presented, according to people familiar with the matter.

Couche-Tard shares fell 1 per cent at 10:05 a.m. in Toronto Thursday after a 9.2 per cent slump the previous day. Carrefour’s stock, which had jumped to the highest level since 2019 on Wednesday, was down 2.9 per cent as of 4:05 p.m. in Paris.

“The bulk of Carrefour’s business is groceries and hypermarkets,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “How does that fit into Couche-Tard’s operating model in a way that makes sense?”

Shoppers at check-out counters of a Carrefour SA supermarket in Paris, France, on Wednesday, Jan. 13, 2021. Alimentation Couche-Tard Inc., the Canadian convenience-store operator that owns the Circle K chain, is exploring a takeover of French grocer Carrefour SA, a deal that would create a trans-Atlantic retail giant.

The talks, first reported on Jan. 12 by Bloomberg, turned the spotlight on a company that’s little known outside of Canada despite a network of 14,200 stores spanning from Texas to Hong Kong.

A methodical approach to acquisitions helped the founders turn one store in a Montreal suburb into an empire of shops and gas stations now worth $41.6 billion (US$32.8 billion). It’s made Bouchard one of Canada’s richest people with a net worth of US$3.9 billion, according to the Bloomberg Billionaires Index.

Discipline and Dealmaking

Analysts see Carrefour’s 7,700 convenience stores and common interest in Asia as potential rationales for the deal. Some expressed trust in Couche-Tard’s track record of walking away from transactions that don’t make financial sense.

Other wondered if the company has run out of takeover options in its core business. Japan’s Seven & i Holdings Co., the world’s largest convenience store operator, agreed to pay US$21 billion last year for Marathon Petroleum Corp.’s Speedway gas stations.

Bloomberg reported in July that a private equity firm and Couche-Tard talked about teaming up on a Speedway bid. In April, the company walked away from a US$5.6 billion proposal for gas station chain Caltex Australia Ltd.

“Could Couche-Tard be taking this step because opportunities to acquire c-stores at reasonable valuations are increasingly becoming rare or is it to diversify the company away from fuel?” TD Securities analyst Michael Van Aelst said in a note to investors. A plunge into supermarkets was “not a move we had anticipated,” he said.

A cyclist bikes past a Couche-Tard convenience store in Montreal, Quebec, Canada, on Wednesday, Jan. 13, 2020. Alimentation Couche-Tard Inc. is daring to go where foreign buyers often fail, weighing a US$20 billion bid for French retailer Carrefour SA.

To date, Couche-Tard’s appetite for deals has served shareholders well. If invested in 1986, when the company first went public, $1,000 would now be worth $950,000, Chief Financial Officer Claude Tessier said at the September annual meeting. The shares are up 73-fold over the 20-year period that ended Dec. 31, according to Bloomberg data.

Much of Bouchard’s drive can be traced back to his childhood, when his father’s excavating business two hours north of Quebec City went bankrupt, throwing the family into poverty. He has described it as a pivotal moment that ingrained an entrepreneur’s desire to dig “solid foundations to build a big house.”

“Now the house is quite pretty and quite big, but there’s still room to make it bigger,” he said in video on the company’s Facebook page in 2016, months after announcing the purchase of Texas-based CST Brands Inc. for about US$4 billion, its biggest deal to date.

Bouchard surrounded himself with a close-knit group of Quebecois associates. They developed a philosophy on store design and customer service they would put to use in their new acquisitions, visiting potential targets to spot what needed fixing.

Couche-Tard also briefly owned a supermarket in the 1980s before deciding against that line of business because it had less growth potential, according to a 2016 biography of Bouchard.

The company entered the U.S. with the 2001 acquisition of a Midwestern chain known as Bigfoot, headed by Brian Hannasch, who 13 years later took over from Bouchard as chief executive officer.

Hannasch, who spoke no French, got initiated early in the founders’ inner circle when he got invited on a fishing trip, complete with wine and group singing. He learned the company’s culture as he brought new stores into the network.

BI’s Bartashus credits Couche-Tard’s ability to control costs and smart decisions on expansion for its success. When Couche-Tard finds something it likes in newly-bought entities -- from fresh food to scheduling software -- it tries to replicate it in other parts of the company.

That’s the case in Norway, which Couche-Tard has used as a lab to understand the rise of electric cars. It’s adding chargers at office buildings and gas stations and expanding the food offering for customers as they wait. Now it’s taking what it has learned to North America, Hannasch said in a September interview.

Customers exit the store at a Circle K gas station, operated by Alimentation Couche-Tard Inc., in the Oekern district of Oslo, Norway.

A long view on electric cars could also be driving the talks with Carrefour, according to Graeme Kreindler, an analyst at Eight Capital. Couche-Tard’s reliance on fossil fuels is a long-term risk; 46 per cent of its gross profit came from fuel sales in fiscal 2020, according to a company presentation.

“Now you have about 26,000-and-change locations if you have to charge your vehicle,” Kreindler said on BNN Bloomberg television. “It’s much more conducive to do that while you go grocery shopping than maybe when waiting for that half-hour or 45 minutes” at a gas station.