Circle K Owner Expands Further Into Pot With Retail Investment
Circle K Owner Expands Further Into Pot With Retail Investment
(Bloomberg) -- Convenience-store giant Alimentation Couche-Tard Inc. is extending its footprint in the Canadian marijuana market.
The owner of Circle K stores on Tuesday announced an investment in Fire & Flower Holdings Corp., an Alberta-based retailer with 23 cannabis stores and a wholesale distribution unit.
Convertible debentures worth about C$26 million ($20 million) would give the Quebec-based company a 9.9% stake under the agreement. Couche-Tard will also get warrants which would allow it to boost its stake to 50.1%. Edmonton-based Fire & Flower said that would give it more than C$380 million in growth capital.
Ten months after publicly expressing interest in Canada’s recently legalized recreational cannabis market, Couche-Tard now has two major agreements with the industry, including a pact with producer Canopy Growth Corp. signed five months ago. The company, which built a network of more than 16,000 stores and fuel station from Louisiana to Ireland through waves of acquisitions, hasn’t made a large purchase in two years.
“Over time, some jurisdictions may view convenience stores as an appropriate retail channel for the distribution of cannabis,” Keith Howlett, an analyst at Desjardins Capital Markets, wrote in a note to investors. “Couche-Tard is expected to be well-positioned should that occur.”
Couche-Tard Chief Executive Officer Brian Hannasch said in the statement that the investment will enable the company to leverage Fire & Flower’s “leadership, network and advanced digital platform to accelerate our journey in this new and flourishing sector.”
Fire & Flower surged as much as 31% on the news and was up 17% to C$1.33 at 12:18 p.m. in Toronto. Couche-Tard was up 0.3% to C$81.10.
The partnership is yet another investment by a large company into the sector, which has attracted alcohol giants such as Budweiser brewer Anheuser-Busch InBev NV and Constellation Brands Inc. Couche-Tard, which is used to selling age-restricted products such as beer and tobacco, has said it can’t ignore cannabis, which became legal in its home market last year and already is in some U.S. states.
With legalization plans gaining traction in several U.S. jurisdictions, marijuana will be even more widely available in 10 years and Couche-Tard wants to be “part of that journey,” Hannasch said in an interview with BNN Bloomberg TV last year.
Under their pact, Canopy and Couche-Tard have opened one store in Ontario already. The retailer cannot operate any in its home turf of Quebec, where the provincial government has a monopoly. Current Fire & Flower stores are based in Alberta, Saskatchewan and Ontario. It also own a digital platform for people who sell cannabis.
While Couche-Tard may end up with a controlling stake, Fire & Flower Chief Executive Officer Trevor Fencott told BNN Bloomberg his company will continue running its own stores while discussing potential licensing of its technology as the two companies talk over the next 36 months.
To contact the reporter on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net
To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jacqueline Thorpe, Carlos Caminada
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