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Alimentation Couche-Tard (ATDBCN: Baa1/BBB+) ATD responds to 7-11's rejection

CONSUMER STAPLES

We start the week where we left off - M&A. Couche has responded to 7-11's rejection with some more direct language;

"Given the mutual benefits of a combination, we are disappointed in 7&i's refusal to engage in friendly discussions. We requested to have our advisors engage in discussions with the advisors to 7&i which was rejected...Couche-Tard has generated total shareholder return of over 450% in the last 10 years, more than 9 times greater than 7&i over the same period."

On financing it has added "highly confident that we have sufficient capacity to finance the transaction in cash". Last reports were it was seeking a mix of equity injection from pension funds and debt. Reminder full debt funding would move it from current net 2.1x to 5.2x leverage - we'd price 1-notch downgrades and significant supply across $/€/CAD - we do not doubt the co's focus on deleveraging from that.

It has finished with adding "highly focused on consummating a transaction". Echoing that 7-11 equities have moved to USD$15.3 overnight - a premium to ATD's original $14.86/share offer. Reminder regardless of funding mix and/or if this deal closes we would brace for supply - co has indicated M&A firepower at $10b - a $8.4b cash short-fall.

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