November 23, 2010 / 4:56 PM / in 7 years

UPDATE 3-Couche-Tard eyes acquisitions, raises dividend

* EPS $0.56 vs year-earlier $0.47

* Ups quarterly dividend to C$0.05/shr

* Announces share repurchase program

* Continues to eye acquisitions in 2011 (Updates with conference call, stock price. In U.S. dollars unless noted)

By Solarina Ho

TORONTO, Nov 23 (Reuters) - Canada’s Alimentation Couche-Tard ATDb.TO said on Tuesday it will seek new opportunities to expand its convenience store network, undeterred by the collapse of its $2 billion bid for a U.S. competitor this fall.

The company, Canada’s largest convenience store operator, restated its determination to grow through acquisitions as it posted a stronger-than-expected increase in quarterly earnings and raised its dividend by 25 percent. Its shares rose more than 3 percent.

“The dividend increase was a nice surprise,” said Derek Dley, an analyst with Canaccord Genuity, who added that given Couche-Tard’s healthy balance sheet, it will likely put some of the cash to use to make acquisitions.

During its second quarter, ended Oct. 10, Couche-Tard acquired 25 stores in five separate deals, with most of the outlets located in central Indiana and the Mobile, Alabama, area. The Montreal-based company now operates more than 5,800 stores under banners including Mac’s and Circle K.

“I think at some point they’re going to look for something a little bigger,” Dley said. “I don’t know if they’re going to be able to find anything of the same magnitude as Casey’s would’ve been.”

Earlier this year Couche-Tard was embroiled in a hostile attempt to take over Casey’s General Stores CASY.O, which repeatedly rejected its offer. Eventually industry leader 7-Eleven made a counteroffer that trumped Couche-Tard‘s, leading the Canadian company to abandon its bid. Casey’s talks with 7-Eleven eventually ended without a deal.

“Casey’s really made it quite difficult for Couche-Tard or for anyone -- for 7-Eleven or whoever else -- to acquire Casey‘s. Obviously it wants to stay on its own. I think Couche-Tard recognizes this. That said, I do think it was an asset Couche-Tard really wanted.”

Whether Couche-Tard will try for Casey’s again remains uncertain. In the past, analysts have frequently noted that successful hostile takeovers are rare in Iowa, where Casey’s is incorporated, due to state laws that favor the target company.

“Although we decided not to pursue our offer on the acquisition of Casey‘s, we continue our growth efforts,” Chief Executive Alain Bouchard told analysts during a webcast. He said, however, that the acquisition environment in the United States is quiet.

“We are looking at other opportunities that may prove to be interesting ... Acquisition is one way for us to create value. But our focus on sales, margins and efficiency is also part of the equation.”

For Couche-Tard’s second quarter, net earnings rose to $105.6 million, or 56 cents a share, from $88.2 million, or 47 cents, in the year-before quarter.

It attributed the increase to higher merchandise and service sales, bigger gasoline margins and a stronger Canadian dollar, among other factors.

“It’s done a great job of growing its margins over the last couple of years and we continue to see that again here this quarter,” Dley said.

Total revenue for the quarter rose 10.5 percent to $4.2 billion. Same-store merchandise sales were up 4.9 percent in the United States and 1.6 percent in Canada.

The company raised its quarterly dividend to 5 Canadian cents a share from 4 Canadian cents and said it will repurchase up to 2.69 million class A multiple voting shares and up to 11.6 million class B subordinate voting shares.

Couche-Tard shares closed up 68 Canadian cents, or 2.7 percent, at C$25.95 on the Toronto Stock Exchange after hitting a high of C$26.22.

$1=$1.02 Canadian Editing by Peter Galloway

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