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By Maiya Keidan, Fergal Smith and Allison Lampert
TORONTO/MONTREAL, Jan 24 (Reuters) - Canadian convenience store operator Alimentation Couche-Tard Inc has been quietly reassuring shareholders about its growth strategy after its abrupt plan to buy French retailer Carrefour SA befuddled investors and cast doubt about the stock's short-term prospects.
Couche-Tard's $20 billion approach for Carrefour was rejected by the French government earlier this month on food security concerns. The bid for Carrefour pushed the Quebec-based company into unchartered territory - an untested market, a relative new business segment and its biggest deal yet - surprising shareholders.
"I guess it alleviated a lot of my concerns ... though not entirely," one top-ten Couche-Tard shareholder who participated in a call with the management said. "It was helpful in terms of how they thought they could have created value by combining businesses."
Investors have marked down the stock 10.2% since the news of the bid emerged, and the spread on the company's $750 million bond maturing in January 2050 has widened 12 basis points as investors demanded a higher return.
The stock price suggests a good number of investors are not comfortable with the revised strategy, the investor added.
Couche-Tard did not respond to a request for comment.
Founded in 1980, Couche-Tard has grown from a single store in Quebec to a global network of convenience stores and gas stations with a $33 billion market value, with 66 acquisitions along the way.
'MANAGEMENT DISCOUNT'
Shareholders who stuck by management's strategy have been handsomely rewarded with the stock surging 733% over the past decade compared with the benchmark Canada index's 34.6% gains.
"It's one of Canada's best-run companies," said Greg Taylor, a portfolio manager at Purpose Investments, who bought some of the stock after the sell-off.
"It may not bounce back immediately as some investors will place a ‘management discount’ on the stock as this deal surprised them. But this company should still be positioned to grow and benefit when markets/economies reopen," he added.
The Carrefour bid was jarring as Executive Chairman Alain Bouchard told shareholders in September that "Couche-Tard doesn't seek to make a splash," emphasizing how patience and rigor have served the company well.
Despite the failed attempt, Couche-Tard plans to revive its bid if it sees a change in the French government's stance, CEO Brian Hannasch said Monday.