Good morning. I would like to welcome everyone to this conference call and webcast to discuss the joint announcement between Carrefour and Couche-Tard. We would like to remind everyone that this webcast will be available on our website for a 90-day period. Please remember that some of the issues discussed during this call might be forward-looking statements, which are provided by the corporation with its usual caveats. These caveats or risks and uncertainties are outlined in our financial reporting. Therefore, future results could differ from the information discussed today. Details of the announcements will be presented by Mr. Alain Bouchard, Founder and Executive Chairman of the Board, Mr. Brian Hannasch, President and Chief Executive Officer, and Mr. Claude Tessier, Chief Financial Officer.
Following the formal presentation, we will open the lines to analysts for Q&A and ask that you please limit yourselves to one question and return to the queue to maximize the number of participants on this call. Please note that this webcast will end at 9:00 A.M. Mr. Bouchard, you may begin your presentation.
Thank you, Jean Marc. [Non-English content]
Good morning, ladies and gentlemen. I want to thank you for joining us this morning on such a short notice. I also want to take a brief moment to acknowledge that today is Martin Luther King Day, and I apologize to those in the U.S. for taking time out of your day to join this call. It has been quite a week. I hope you all had the chance to see the press release, which we issued jointly with Carrefour over the weekend.
I know you have many questions, and we will get to them on this call. I want to spend a few minutes sharing some insights into the discussion with Carrefour and how they align with our history, our long-term vision. Brian will have a few words looking into the strategic rationale behind the offer. When I opened my first store in Quebec 40 years ago, I never imagined I would be in France meeting with top government ministers and sharing Couche-Tard's vision and mission to make our customers' lives a little easier every day. During our discussions, we saw a significant opportunity to enhance our respective businesses, we were mindful of the many shareholders' concerns. As you have read, in light of recent developments, our talks could not continue.
Over the last decades, while growing our business, we have made many bold moves, some of which were not always obvious to our stakeholders. Let me remind you of a couple. The Circle K acquisition was a big bite for us at the time, and many didn't believe in our chance of success. Our entry into Europe with Statoil Fuel & Retail was unexpected at the time, and I remember lots of skepticism about our ability to derive synergies from a new geography. Europe EBITDA has nearly doubled since that time. Was I hoping our bold approach to Carrefour would have turned out differently? Of course. Yet, I'm tremendously proud that Couche-Tard has the financial strength and acumen to make such an offer.
Proud that many more around the world understand and support the strong foundation and history of our company, and proud that we showed an entrepreneurial spirit, all the while reaffirming our commitment to our core business and our Double Again strategy. No doubt we live in an ever-changing fuel and retail landscape, and we have always looked for ways to innovate and grow our business. Over the last several years, we are boldly moving into the future with our work with EV mobility while continuing to invest in fuel and grow this category. Fuel remains fundamental to our business, and yet we are able to play a role in developing complementary solutions. We are also boldly moving forward with improving the customer journey.
Just this week, we announced our first frictionless store and retail research partnership with McGill University. We are on the forefront of pay-by-plate license recognition in Scandinavia, just to name a few examples of our entrepreneurial spirit. As one of Couche-Tard founders, I have never shied away from setting a long-term vision for the business. I spend a lot of time thinking about how Couche-Tard can leverage its human and financial capital to innovate and grow. Now we can continue to evolve and ensure our long-term strength and profitability. We have worked hard to create a company culture that we are proud of. I am its greatest ambassador. I believe in our strategy, our five-year plan to double our convenience and fuel business, and has been well articulated in the market and through our many discussions with investors. Its execution remains well on track.
In the longer term, we are always thinking about how our strategy can develop to leverage our core competencies, how we can improve areas where our capabilities are less robust, and how we can find new avenues to grow and advance our customer-centric mission to make our customer lives a little easier every day. We are a retailer. I will now turn over the call to Brian to address the strategic rationale in more detail. Brian.
Thank you, Alain, and good morning, ladies and gentlemen. Before we get to your questions, I want to further look at the strategic rationale behind our friendly discussions concerning a transaction with Carrefour. Although we're no longer in those discussions, I want to share with you why we entered into them and why we see value in continuing operational partnerships with Carrefour. I also want to underscore the continuing strength we see in our existing business and our strategy. We have heard from many of you over the last week that our approach to Carrefour came as a bit of a surprise. That may be understated. That was not our intention, and of course, we had just begun very preliminary talks when the news leaked in the media.
We approached these discussions, as Alain clearly said, committed to our goal of doubling our convenience and fuel business into our many ongoing organic initiatives in operational efficiency, improving our customers' journey, and innovation. We considered it important to look at related growth platforms and how we can add to our core capabilities. Part of our Double Again is to look at new geographies also, in particular the Asian market, as well as adjacent retail spaces, so we can continue to serve our customers around the globe in whatever channel best suits their needs. Our discussions with Carrefour grew out of the strategic vision and are a natural extension of our interest in growth and value creation for our shareholders. Consistent with our approach to M&A over the years, we were deliberate and thoughtful in considering grocery and in considering Carrefour.
With any file, even before we move to due diligence and fully explore synergies, we first start with our customary on-the-ground approach. When we think about ways to expand our platform, we visit many Carrefour stores in five of their key countries to see firsthand their various omnichannel locations. We developed a strong sense of what we think we can achieve as a combined network. I'll just list off some examples. Certainly, adding scale and complementary geographies to our network. Strengthening our overall capabilities by adding Carrefour's core competencies in procurement, supply chain, private label, technology, and e-commerce, to name a few. Adding value with our abilities in operational efficiency and optimal sharing of best practices that have been a foundation here at Couche-Tard. Addressing the needs of our customers through many complementary formats and channels.
Combining respective strengths and convenience with Carrefour's nearly 8,000 convenience locations, while helping them accelerate the growth of this channel in some of their core markets. Enhancing Carrefour's fuel capabilities and bringing benefits from Couche-Tard's scale in this space. Learning and adapting some of Carrefour's advanced sustainability journey. More importantly, adding tremendous competency in food that will always be central to our customers' needs, regardless of the format. Finally, and I think most importantly, I believe the greatest value we've brought to any of our acquisitions over the 20 years I've been with the company is a culture based on believing in and empowering people to do the right thing each and every day, and we saw an opportunity in Carrefour to do this again. This led us to a level of confidence to begin our preliminary discussions with Carrefour's management.
In our early discussions, we were looking at a bold offer. We were looking at a bold offer that would make us one of the top five retailers in the world and create significant value for our shareholders through meaningful accretion. As always, we're looking to build on the fundamentals of our business and mission, our operational excellence, and our focus on generating strong returns for our shareholders, as we've done for many years. Since 2011, we've generated a cumulative average growth rate of 22% per year for EBITDA, while converting an impressive 35% of that EBITDA into free cash flow. Over the last 10 years, for a total of more than CAD 10 billion, CAD 2 billion in 2020 alone. While looking at a grocery chain, we never wavered from our commitment to fuel. It's fundamental to our business. We're going to be in the fuel business for the long time.
Just to demonstrate that and our commitment there, over the last few months, we began to build even more capabilities to be involved more in the vertical supply chain, including logistics, trading, and growing our B2B business in North America. In 2020 alone, we pursued files with sizable fuel businesses, including Ampol in Australia and Speedway here in the U.S. As a complement to fuel, we've demonstrated our innovative capabilities in the EV business model and are investing resources to refine those initiatives and grow them. We also remain steadfast in our investments in our base business. We're building new stores and remodels, and this year alone, we're committing CAD 750 million to building new stores in our network this year. M&A is in our DNA and will continue to be essential to our strategic vision.
In addition to consolidating the fragmented US C-store market, we believe there are tremendous opportunities for growth in Asia and opportunistic growth opportunities in Europe. Our recent acquisition of Circle K Hong Kong is an important launching pad for our ambition in the area. In relationship to Europe, we've always spoken about it as being many different markets, each with its own dynamic. We've also said we'd be optimistic in our pursuit of growth through acquisitions in this area, always with a focus on adding value for our stakeholders. As Alain mentioned, we've had great success in our past, moving into geographies where we've had no overlap. We think we can grow through furthering conversations with Carrefour concerning operational partnerships.
We're looking at areas of cooperation, including sharing of best practices on fuel, pooling their overall purchasing volumes, partnering on private label development, improving the customer journey through innovation, and evaluating ways of optimizing product distribution in overlapping markets. We see these areas of cooperation with Carrefour aligning perfectly with our five-year strategic plan, as well as our commitment to strengthen our core convenience and fuel business while pursuing opportunities in related growth platforms. Let me now open it up for questions. Jean Marc?
Thank you, sir. Ladies and gentlemen if you do have any question at this time, please press star followed by one on a touch-tone phone. You will then hear a three-tone prompt acknowledging your request. Should you wish to withdraw of your question simply press star followed by two. If you are using a speaker phone, please lift up the handset before pressing any keys. Your first question will be from Irene Nattel at RBC. Please go ahead.
Thanks, gentlemen, and thank you for your comments. I guess, starting with what I've been hearing all week. Investors thought they knew what Couche-Tard was all about. It's a convenience retail player with a global reach, focus on operational excellence, financial discipline, and as you pointed out, not afraid to make bold moves, but always anchored in that convenience retail. With the Carrefour bid, investors aren't quite sure that they know what the focus is. Can you please talk about how that fits in and whether we should be expecting you to bid for another grocery retail, for example, or something else?
It's a great question, Irene. Good morning. First and foremost, think we're a retailer. That fact gets lost a little bit. We operate 300 quick-serve restaurants as an example. We operate our core formats. We operate sites without stores. Fundamental to that is understanding our customer and what they want from us, where they want it, when they want it. As we see the retail landscape changing, channels continue to blur, even at a faster pace. Omnichannel, certainly I think is more and more important to meeting the customer's needs across multiple formats, multiple times a day and maybe in their home as we're seeing during the pandemic, that being amplified. When we looked at this, Carrefour was really advanced in that journey. They've got three formats in addition to e-commerce.
They've got the large hypers as we're all aware of, supermarkets and then almost 8,000 convenience stores. One of the pillars of their strategy was to continue to accelerate the development of that convenience format. That's an area we think we can bring a lot of value to them as well. Then I touched on some of the others. I think we are more than just a small box retailer. I think we're a retailer first and foremost, but we also go into both our core business and any adjacent business with our eyes wide open that the world's changing and it's going to take competitors with the right scale and the right culture and the right focus to win.
That's fine. That's very helpful. Is it possible that you could perhaps look at sort of just building those capabilities instead of?
Yeah
Buying them in a massive transaction?
I think we're doing both in parallel. We're making, really for us, unprecedented investments in data analytics. Alain mentioned our McGill store opening this morning, contactless. You'll see in Sweden, frictionless forecourt coming to life there. We are absolutely doing that in parallel. We're committed. It's been a bit frustrating with the M&A in our space, quite honestly. We've been very active and I listed off two things we took big swings at this year, but there were many others that don't make the press. We're committed to growing our base business, but also if we see an opportunity to strengthen our core, bring value to shareholders, we're open to doing that in a very thoughtful and disciplined fashion.
Thank you very much, Brian.
Thank you. Next question will be from Peter Sklar at BMO. Please go ahead.
Good morning. Brian, as you know, Carrefour has had significant challenges for many years. For example, their hypermarkets, that kind of format has been a challenge for them. I'm just wondering what your perspective was in terms of Carrefour being able to turn around its operations, and what capabilities and insights that Couche-Tard management could have brought to the table in order to accelerate the turnaround of that business.
I appreciate that some of you may have been along on the Carrefour journey over the last 20 years and certainly followed their stock developments. It has been difficult. I think some of that is competitive nature in a couple of their core markets. Some of that is self-inflicted, and I think they would admit that. When we looked at it, they'd put in new leadership in the last 36 months, and we think they're getting traction. We think they're doing some of the right things, and we think we're well-positioned to help them accelerate that journey. The hypermarket is one piece of the story, but there's some real jewels inside of Carrefour that don't get a lot of attention. When we looked at it, I mentioned earlier, culture's a big thing.
I think really empowering the people in the countries that Carrefour operates in to do what's necessary to do the right things for the customers and to take bold action are areas that we could help them with, in addition to all the things we do every day. Best practice sharing just being so foundational to our success. We have a very humble culture. It's not an invented here culture. We're absolutely happy to steal good ideas. I think foundationally, that's the biggest thing. We had a very concrete synergy plan developed around fuel, around the small box. Certainly the infrastructure, the technology investments. We think that they have a huge opportunity to improve the customer journey in their stores and jointly develop the solutions that work both in our format and grocery, I absolutely think are on the table there.
Just, again, even in the preliminary conversations, I think both sides saw the merits of the combination, not just financially, but making a better, stronger global retailer. We were excited about that opportunity.
Lastly, Brian, if I could ask, how long has Couche-Tard been considering other retail channels kind of beyond C-store? Is this something that you've been kicking the tires for quite a while and we just generally didn't know about it because it didn't leak out and Carrefour was the first one? Is this more of a new initiative?
Yeah. Three years ago, we really sat down and developed our Double Again strategy, and one of those pillars is growth. Two things I think we probably said were we wanted to be in Asia, and we've accomplished that, and we wanted to ramp up our NTIs, our new large format locations. We're on that journey and investing heavily to make that happen. Very pleased with those. We also went through an exercise of looking at adjacent retail, and that's not for the sake of diversification. It's for the sake of can we bring our skills and our competencies and add value in other spaces? We looked at the dollar channel. We looked at quick-service restaurants, travel retail, grocery. Those are the spaces that we think are close to what we do and have similarities and opportunities to bring value to.
It's not new. This is really the first time we've narrowed in on a specific target and attempted to get something done. It's been a part of the strategy, just it's been a gradual learning process as we spent time looking at other channels in geographies around the world and really narrowing our focus into a couple areas that we think make a lot of sense for us.
Okay. Thank you.
Thank you. Your next question will be from Bonnie Herzog at Goldman Sachs. Please go ahead.
All right. Thank you. Good morning, everyone. I wanted to ask and see how committed are you to your goal to double EBITDA by FY 2023? I guess I'm wondering if there is a risk going forward that this target might not be achievable from an M&A perspective and/or does it now suggest you might need to pursue acquisitions that ultimately do increase your risk profile? I guess I'd like to hear from you your risk tolerance and how we should be thinking about all this. Thanks.
Yeah. Prior to our public release of our strategy three years ago, about 60%-65% of our EBITDA growth over the prior decade had been M&A, and 35%-40% had been organic. The commitment of our strategy is to flip that upside down, drive organic, but still pursue M&A when and where it makes sense. Three years in, we are on track on the organic side. Setting aside a pandemic that really makes it hard to understand what good looks like, we're doing what we said we would do. We've got a very disciplined follow-up process and feel very good that we're getting traction in all the key areas across 23 work streams to make this happen. If you look at our bottom line, we've continued to grow it despite not doing any meaningful acquisition for over three years now.
I feel good about that piece. The M&A side, Bonnie, I'm proud of that, too. Frustrated, but proud. We've had opportunities in front of us, opportunities that we would love to have brought into the family, but we've walked away from a lot of them over the last three years. Just we can't get the valuations to make sense to us. Again, history will judge whether those were good deals or bad deals for whoever was successful. We're not going to do dumb deals for the sake of doing deals. Hopefully, three years of not doing deals demonstrates to each of you that we're serious about that. When we do something like Carrefour, it's not under the pressure of doing a deal. We would've done a Speedway or something else if that was the motivator.
This is looking at transactions that we think can deliver significant shareholder value, both in the medium and long term.
Anything additional, Bonnie?
Yes. I'm sorry, I was on mute. I apologize. I just wanted to quickly verify something else about priorities for M&A. I believe you've mentioned that the U.S. is sort of your first priority in terms of acquisitions, Asia a close second. I think you've kind of thought about Europe as just being maybe more opportunistic. I just wanted to verify that, and then does that in any way suggest limitations of deals in the U.S. and Asia as you pursue Carrefour? Thanks.
Yeah. Again, we were preliminary in conversation with them, but inside of our own model, I think we had set up a governance structure that allowed my team to remain laser focused on growing the convenience and fuel business while putting the right amount of change agents into Carrefour. I think we're always worried about culture and dilution of culture, but I think we had a reasonable plan here. The U.S. is still a great market for us. It's fragmented yet. There's still a lot of opportunity here, just because of the nature of the vendor community and everything else, it's just an area that we extract a lot of synergies out of. Asia's early. We've got Hong Kong done. We think we've got one of the best management teams in that part of the world that will help us define the next opportunities.
We're actively working that now that we've got that transaction closed, and just believe that the growth in that part of the world will just be very interesting for us in the coming years. When I looked at Carrefour specifically, we'd always said we'd be optimistic about Europe. A lot of that was level playing field, particularly in our channel. A lot of countries, take France, for example. You can't sell tobacco, you can't sell alcohol, so the playing field isn't level. On the grocery side, we didn't find that to be the case. In every country, the grocery channels had full access to the consumer. I would also point out, Carrefour is much more than a France story. They've got some real growth opportunities.
Over 50% of their EBITDA was coming out of Latin America, which is a growth market for them and a market that they've got a winning formula in, and a nice ecosystem. Not just large format, but small format, grocery, omnichannel, financial services. This was something that, again, we took our time, we understood it, and we think it would brought a lot of value to us.
Okay. Thank you.
Thank you. Next question will be from Karen Short at Barclays. Please go ahead.
Hi. Thanks. Just wanted to get your perspective. Do you have a view as to whether or not food security will always be a concern for the French government, or if this was a stance that was more tied to the pandemic, as in may not be a permanent stance? The second question I just had is, can you quantify the potential dollar opportunity to EBITDA with respect to this partnership in terms of sharing best practices?
Yeah. I'll answer the second one first. I would say we're very preliminary. Obviously, this just happened late last week. To Carrefour's credit, it was really their initiative to say, "Hey, let's continue to have relationship and dialogue and see if we can capture some value." What we've agreed to do is enter into exploratory conversations in the coming months, and we'll report back on that. I'd say it's too early to really try to quantify that today. In terms of politics, I think we went into this with eyes wide open, knowing that this was a risk. I certainly do believe that the pandemic has heightened the food security issue, particularly in France. Whether that changes over time, it's hard to say. We'll continue to monitor that situation.
As of right now, we respect the position of the French government and we're acting accordingly.
Sorry, can I just do a quick follow-up?
Sure.
Could you just remind us what your comfort level is on leverage, just broadly? I know you, I think you want to maintain investment grade, but what would that mean in terms of, like, a peak leverage number? Assume you could pay it, get back down to investment grade over a certain period.
Yeah. I mean, our model for this transaction was very much consistent with what you've seen in the past, Karen. Hitting leverage numbers very consistent with what you've seen in our last couple of large transactions. That is very much consistent with our conversations with the rating agency and our commitment to remain investment grade. We were very prepared to make sure that the balance sheet remained strong and able to continue to grow, both on the food side and on the convenience and fuel side as the right opportunities were in front of us.
Great. Thank you.
Thank you. Next question will be from Patricia Baker at Scotiabank. Please go ahead.
Good morning, everyone. Brian, in your discussion of the strategic rationale for pursuing Carrefour, you noted that you saw that there would be an opportunity for Carrefour to be able to help inform and aid you with the food journey at Couche-Tard. Is there a possibility with these operational partnerships that you'll be able to garner some help there with the longer-term food journey?
It's a great question. I think on the procurement side, absolutely. We think they've got world-class procurements capabilities and great relationships with the farming communities around the world that they source from. I think we certainly are going to explore that. My only pause there, Patricia, is just the logistics systems that we operate within are very different than what they have in Europe. We need to make sure that we can really make meaningful value creation out of this. Again, I'd say just remind, it's in the exploratory phase. When I look at just their operational competency around food, for those of you that have been in their stores, they're good. They're doing a lot of things very well. Very heavy presence, particularly in the small format with grab-and-go meals, bakery. I'd like to think there's some learnings there.
I'd say it's a bit early to try to quantify anything.
No, very well understood. Thank you for answering my question, and good luck.
Sure. Thank you, Patricia.
Thank you. Next question will be from Chris Li at Desjardins. Please go ahead.
Good morning, and thanks for doing this call. Brian, is there a possibility Couche-Tard will look to reengage in merger talks again with Carrefour under more favorable political conditions, or is this file closed permanently?
I'm old enough to believe that there's no such thing as permanently. We'd like the transaction, and we'd love to do the transaction. If we got signals that the environment could change or would change from the French Government or other key stakeholders, we'd love the opportunity to reengage under the right conditions and assuming we haven't found another way to create more value for our shareholders. We'll stay tuned and we'll see what happens. For now, it's definitively closed.
Okay. Then you mentioned earlier, in the past, you've looked at other things outside of convenience. I think you mentioned dollar stores and others. Can you just repeat what else you looked at before?
Again, a lot of this is a paper exercise, Chris. Looking globally at different channels, either emerging or existing. Travel retail would be another one. You think about that small format existing in hospitals, train stations, airports. That's an area. The quick-serve restaurant business, another. I did mention dollar stores, which are very consolidated in Canada and the U.S., but a little more fragmented in other parts of the world. Again, those are areas that it was more of a white paper exercise as we tried to narrow in on targets that we thought were complementary and could bring value to Couche-Tard shareholders.
Perfect. Thank you, and good luck.
Thanks, Chris.
Thank you. Next question will be from Graeme Kreindler at Eight Capital. Please go ahead.
Hi, good morning. Thank you for taking my question here.
Good morning.
I wanted to follow up here, given the respective geographical footprints of both Carrefour and Couche-Tard, and Brian, your previous comments about adjacent retail opportunities. Wanted to get your thoughts on what it would look like, perhaps either exploring operational partnerships or merger targets in something that might be closer to the current Couche-Tard footprint. Maybe that's something in North America. Thank you.
Yeah, it's a good question. As we've grown in scale, we've seen some interesting things develop as I think everyone realizes that retail is quickly evolving. You saw the partnership between Walgreens and Kroger as an example of two large companies come together from both a procurement standpoint, but then also leveraging each other's capabilities in private label and omnichannel formats. We're certainly thinking about those things. We're actually entering our business planning cycle, and that's one of the conversations we're going to have is, are there other partnerships whether it be procurement, logistics, or others that make sense for Couche-Tard in our core geographies. Again, that's preliminary at this point. I've seen what both Carrefour and other retailers have done globally as this is happening at a more rapid pace.
I think it's something we have to be open to and give thoughtful consideration to.
Understood. Thank you for that. Just a quick follow-up to that. When looking at adjacent retail opportunities across the number of different categories that you mentioned earlier, how much of that does Couche-Tard look at as an opportunity to leverage what it's currently doing in EV infrastructure or some of the R&D that it's doing giving a potential additional touch point for where the consumer might be able to interact with that? Thank you very much.
Yeah, it's a good question. We're absolutely focused on our analytics capability becoming even more local in our pricing, our assortment, our promotion, and then removing friction from the forecourt and the in-store experience. Have we cracked the code? I would say it's early yet, but I'm very pleased with some of the things that we're piloting today and some consumer reaction. Some of those would absolutely have application in adjacent spaces. Without going into too much detail, we think, in addition to kind of the core things we bring, culture, financial discipline, operational integrity, which are big. We do think that some of the investments we're making in the customer journey, the customer experience, absolutely apply to some of the adjacent channels that we've considered.
Appreciate the color. Thank you very much.
Yeah. Thanks, Graeme.
Thank you. Next question will be from Michael Van Aelst at TD. Please go ahead.
Hi, good morning. I just wanted to clarify a few things to start. You mentioned some of the adjacent retail areas like dollar stores and QSRs and travel retail. You also mentioned that you had narrowed it down to a couple of areas that made sense. Are these the areas that make sense to you, or is it a smaller sub-sector of this?
It's a smaller sub-sector, Michael. Good to hear your voice. Yeah, some of it's valuations. There's some channels that I think have historically had high valuations for a number of reasons, whether it's a franchise model or just the overall dynamics of the channel. We've narrowed beyond that subset I went through to, I'd call it two areas today that we think could make sense for us. I don't want to lose track of our core business. We've been through this cycle before, ladies and gentlemen, where we couldn't get a deal done because of the valuations. We've seen tremendous liquidity injected into the global economy by governments. We've seen persistently low interest rates and a lot of liquidity out there, and it's created a very, I guess, aggressive environment for M&A in our space. We've seen this pass as well.
Coming out of it, coming out of some downturns in the economy have been some of the best times for Couche-Tard over our history. We're keeping the balance sheet in the right condition and prepared to take advantage of our existing core business when the opportunities are there, and we're confident they will be. It's more of a question of timing than desire.
Okay. The two areas, I guess we can assume one is grocery. Are you willing to mention the other?
Yeah, not at this time, Michael. No. We've had some activity in the space, and I really don't want to disrupt that.
Okay. You've seen when you were going through it, clearly you saw the returns. You saw some attractive returns in grocery. Would they hit your historical return on invested capital?
Yeah. Absolutely. somebody yesterday that, people will still be eating 100 years from now. Is the negative posture around grocery overdone? That's a question. When we looked at the synergies that we think existed between the two companies, hard synergies, not just what-ifs, but hard synergies, that alone got us to a very attractive place. That was without big assumptions around turnaround, particularly of the hyper format. There's, again, some strong formats and strong geographies inside of that network that, we think that combined with the synergies that we had on the table would have delivered very nice returns for our shareholders.
Okay. With M&A appearing a little bit more difficult at this time, and Couche-Tard having a very strong balance sheet with some very significant liquidity, what are your views on continuing to pursue M&A short term versus balancing that with maybe returning some material cash to shareholders while you wait?
Yeah. We do have a buyback program in place. I think we'll be opportunistic at exercising that. It's really us trying to balance where we think we can deliver the most value. For my career and for Alain's 40 years, that's been very consistently about deploying capital into our business and generating very strong returns. If we don't see that opportunity there in the short term, we'll take appropriate actions, and that could include a share buyback acceleration.
Okay, thank you.
Yeah. Claude's on the phone, too. If you want to add anything, Claude, feel free.
No, I think you said it well, Brian. That journey into M&A continue. I think there's a reality that comes with Couche-Tard today is that we have also the ability to look at different deals and also deals that could still bring significant shareholder value to our shareholders. Yes, like you said, we're going to be opportunistic on our buyback.
Great. Thank you and good luck.
Thank you. Next question will be from Mark Petrie at CIBC. Please go ahead.
Hey, good morning, and thanks for doing all this. I just wanted to follow up actually on a couple of those topics that you just touched on. I guess specifically, when it comes to the balance sheet and capital priorities, do you have a more specific framework that you might be able to share with regards to how you would prioritize or allocate capital to growth in these newer verticals versus growing in the core fuel and convenience business?
I put myself on mute. Sorry about that, Mark. Yeah, we've been pretty consistent over the years at taking about 1/3 of our EBITDA or free cash flow and investing it in the core business. That's really when we look at our Double Again strategy, we've mapped out how much of that capital would go to driving organic growth and how much would be set aside for M&A. That's very easily doable within the free cash flow generation model that we have today. Obviously, when you think about something of the scale of a Carrefour, that was a different ballgame. We had a plan that would allow us to very much remain in a good position with the balance sheet, at an investment grade level, and with the ability to continue to drive our Double Again strategy inside the convenience and fuel business.
In this context, I would call it's an and, not an or. We very much had this model to be able to do both and do both well.
Yeah.
Okay.
If I can add also, Brian, we always have the focus also to bring our return on capital employed over 15%, and that's something that we disclose and we've been saying, and that's still true also in looking at other adjacent areas for M&A.
Okay, thank you. I wanted to just also follow up on the topic of cultural fit. Just more broadly, not necessarily specific to Carrefour, but how do you think about that translating across sectors into geographies where you don't have operations and across into sectors where they are retail necessarily, but obviously different sort of retail?
I think the best example I can give you would really be our entry into Europe markets. That was nine years ago. The markets were skeptical about our ability to develop synergies. We didn't just have one culture there, right? We had 10 different countries in Europe. Trust me, it's very different in Ireland than it is in Latvia, and on and on and on. I think, again, a core part of us is just being humble and I'd like to think if I went back and talked to the people about that experience 10 years ago, it was about us empowering listening, developing the right governance model to make sure that operations and the customer were the focus, not politics, reports, things like that. We found that that fits, and it's fit pretty universally.
It takes different shapes across different cultures, but that core management style of believing that people get out of bed every day wanting to do the right thing and giving them the right space to do that, while at the same time leveraging our scale and processes where they make sense. That's a fine balance that we'll always continue to walk in our company. It's worked well. We've doubled the EBITDA in Europe with the same management team that was there nine years ago. While Carrefour is certainly bigger, we think that that same journey could absolutely happen there.
Okay, thanks. If I could just ask one more, just with regards to evaluating these newer growth engine opportunities or outside of kind of the core legacy business. Could you just elaborate and come back to the specific criteria for how you would evaluate that? Presumably, there are parts of retail that are too different from the legacy business. Just how do you specifically evaluate how these would leverage your core competencies?
It's a good question. I would say a pretty common theme has been direct contact with the customer, so retail, and it's been with food in the equation. Food and fuel. Everything we've looked at has really had that common theme. We think that's where we got value to bring. We're a small box retailer today primarily, but that doesn't mean we're headed down a path of getting into hard goods or other things as a core part of the journey. I would say food's the common theme there across everything we've looked at. Fuel being a complementary piece of that if it exists. I know it's a little vague, but that's really as we narrowed the world of retail down to those couple areas we've referenced, those would be the couple of themes.
What's got to come out of that is a belief that the synergies and the acquisition price are right to be able to de-risk the project significantly and deliver really strong return profiles for Couche-Tard shareholders.
That's very helpful. Appreciate all the comments.
I think it's.
Yeah. All the best.
Oh, sorry. Go ahead.
If I can add.
Thanks.
Yeah, if I can add, Brian, to that also on the financial side, we are always using the same discipline and we're looking at cash flow stability, capital requirement, and also the return. Like I just mentioned before, we continue to provide the return on capital investment that is meaningful. Also, we like the concepts that are resistant to harder time, to recession and things like that. That could explain a bit of our interest into grocery.
Very helpful. Thank you. All the best.
Yeah. Thanks, Mark.
Thank you. Next question will be from Vishal Shreedhar at National Bank Financial . Please go ahead.
Hi, thank you for taking my questions. I'm not sure if you can comment on this, but any information you can provide is useful. Is Couche-Tard currently looking at other files, or do you perceive that there are other files that you can review which are meaningful regarding acquisitions, or is it just more of a lull at the moment?
I would say, Vishal, the first 90 days of the pandemic, the world kind of locked up. We've actually seen pretty solid deal flow over the last six months, and that exists today. We've got a number of other files in our business that we're looking at, some big, some small. No, I would say the market's pretty robust right now.
Okay. This is more of a longer-term question, just to try and understand where management's thoughts are at. If multiples in the C-store space don't come down to levels that's consistent with Couche-Tard's strategy and management has to take on more risk, let's say, entering into new segments or regions where it's not as familiar and where its core competencies don't necessarily lie, will management move up the risk curve to learn more and enter new regions or geographies or new sectors? Will it accept a lower growth in the interim until acquisition multiples come down more consistent with its understanding?
I think it's a both answer to that. By definition, I think anytime you go and do something new, you're going up the risk curve. What we've done consistently over my career and Alain's 40 years is get our hands dirty. We're not hiring a bunch of bankers and just doing all this on spreadsheets. Even in COVID, we were able to get into five countries and see somewhere around 500 stores. Our due diligence, I think, has been a foundation of how we de-risk transactions, whether that be in our existing space or something else we're looking at. Our commitment is that same get your hands dirty approach to diligence and understanding the deal will remain. That said, if we can't deliver superior returns going into new spaces, we're okay with a lull.
Hopefully, you've seen, the last three years, we've not done, other than Hong Kong, a material transaction, and that has not been for lack of opportunities. It's been for the interest of our shareholders and believing that some of the deals just went too expensive for us. We'll balance those. Our approach to M&A, whether it be in our core business or in an adjacent space, will absolutely remain consistent.
Thank you.
Thank you. At this time, we have no other questions. Please proceed.
Jean Marc.
Yeah. Thank you. That's it for today. Thank you.
Thanks, everyone, for participating and have a good Martin Luther King Day for those in the U.S.
Thank you. If I may add, the founders remain committed for the long term. The board was very supportive for this acquisition. We're very serious at adding value to our shareholders. Thank you.
Thank you. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we do ask that you please disconnect your lines.