Alimentation Couche-Tard Inc. (CA) Earnings Call Transcript & Summary

Good morning. My name is Sylvie, and I will be your conference operator today. [Foreign Language ] I will now introduce Mr. Jean Marc Ayas, Manager, Investor Relations at Alimentation Couche-Tard. [Foreign Language]

[Foreign Language] 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. Also, 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 announcement 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. [Operator Instructions] Please note that this webcast will end at 9:00 a.m. Mr. Bouchard, [Foreign Language].

[Foreign Language] 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 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. First, 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 then 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, and we were mindful of the many shareholders' concerns. Yet, 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 drive synergies from a new geography. But Europe EBITDA has nearly doubled since that time. Was I hoping our bold approach to Carrefour 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 at ways to innovate and grow our business. Over the last several years, we are broadly 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 broadly moving forward with improving the customer journey. Just this week, we announced our first frictionless store and retail research partnership with McGill University. And 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's founders, I have never shied away from setting a long-term vision for the business. I spent a lot of time thinking about how Couche-Tard can leverage its human and financial capital to innovate and grow. And 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, and I am its greatest ambassador. I believe in our strategy, our 5-year plan to double our convenience and fuel business, and that 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, have 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 and to our many ongoing organic initiatives in operational efficiency, improving our customers' journey and innovation. However, we consider it important to look at related growth platforms and how we can add to our core capabilities. Part of our double again strategy is to look at new geographies also, in particular, the Asian market as well as adjacent retail spaces so 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 &A over the years, we are 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 and we think about ways to expand our platform. We visited many Carrefour stores in 5 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 in 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 and operational efficiency and optimal sharing of best practices that have been the foundation here at Couche-Tard; addressing the needs of our customers for many complementary formats and channels; combining respective strengths in 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 our -- from Couche-Tard's scale in this space; learning and adopting some of Carrefour's advanced sustainability journey; and most importantly -- and more importantly, adding tremendous competency in food that will always be central to our customers' needs regardless of the format. And finally and I think most importantly, I believe the biggest value we 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 5 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 that we've done for many years. Since 2011, we 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 $10 billion, $2 billion in 2020 alone. While looking at a grocery chain, we never wavered from our commitment to fuel that'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. And as a complement to fuel, we've demonstrated our innovative capabilities in the EV business model and are investing in 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 $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 U.S. 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 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 have 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. And 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 the best practices on fuel, pooling the 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 5-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?

[Operator Instructions] And your first question will be from Irene Nattel at RBC.

I guess starting with what I've been hearing all week. So investors thought they knew what Couche was all about. So it's a convenience retail player with a global reach, focus on operational excellence, financial discipline and as you put, 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. So can you please talk about how that fits in and whether we should be expecting you to bid for another fuel -- another grocery retailer, for example, or something else?

It's a great question, Irene. First and foremost, I think, we're a retailer. That fact gets lost a little bit. We operate 300 quick-serve restaurants as an example. We have about -- operate our core formats. We operate sites without stores. But fundamental to that is understanding our customer and what they want from us, where they want it, when they want it. And 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 customers' needs across multiple formats, multiple times a day and maybe in their home, as we're seeing during the pandemic, that being amplified. So when we looked at this, Carrefour was really advanced in that journey. They've got 3 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. And one of the pillars of their strategy was to continue to accelerate the development of that convenience format, and that's an area we think we can bring a lot of value to them as well. And then I touched on some of the others. So 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 is changing and it's going to take competitors with the right scale and the right culture and the right focus to win.

Brian, that's very helpful. Is it possible that you could perhaps look at sort of just building those capabilities instead of 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. So we are absolutely doing that in parallel, and so we're committed. It's been a bit frustrating with the M&A in our space, quite honestly. We've been very active in -- I listed off 2 things we took big swings at this year, but there were many others that don't make the press. So we're committed to growing in 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.

Next question will be from Peter Sklar at BMO.

Brian, as you know, Carrefour has had significant challenges for many years. For example, their -- they had -- hypermarkets have been -- that kind of format has been a challenge for them. And I'm just wondering like 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.

So I appreciate that some of you may have been along in the Carrefour journey over the last 20 years. And we certainly followed their stock developments. It has been difficult. I think some of that is competitive nature in their -- a couple of their core markets. And some of that is self-inflicted, and I think they would admit that. So when we look at it, they've 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, we think -- I mentioned earlier culture is a big thing. And 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. And I think foundationally, that's the biggest thing. And then we have 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 developed solutions that work both in our format and grocery, I absolutely think, are on the table there. So just, again, even in the preliminary conversations, I think both sides saw the merits of a combination, not just financially but making a better, stronger global retailer. So we were excited about that opportunity.

And 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? Or is this more of a new initiative?

Yes. So 3 years ago, we really sat down and developed our double again strategy, and one of those pillars is growth. And 2 things I think we publicly said were we wanted to be in Asia, and we've accomplished that. We wanted to ramp up our NTIs or new large-format locations, and we're on that journey and investing heavily to make that happen. I'm very pleased with those. But 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. And so we looked at the dollar channel, we looked at quick-serve 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. So it's not new, but this is really the first time we've narrowed in on a specific target and attempted to get something done. But it's been a part of the strategy, just not -- it's been a gradual learning process. We spent time looking at other channels in geographies around the world and really narrowing our focus into a couple of areas that we think make a lot of sense for us.

Your next question will be from Bonnie Herzog at Goldman Sachs.

I wanted to ask and see how committed are you to your goal to double EBITDA by FY '23. 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? So I guess I'm -- I'd like to hear from you your risk tolerance and how we should be thinking about all of this.

Yes. So prior to our public release of our strategy 3 years ago, about 60%, 65% of our EBITDA growth over the prior decade had been M&A and 35% to 40% had been organic. And the commitment of our strategy is to flip that upside down, drive organic but still pursue M&A when and where it makes sense. So 3 years in, we are on track on the organic side. Setting aside the pandemic that really makes it hard to understand what good looks like, we're doing what we said we would do. And 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. And if you look at our bottom line, we continue to grow it despite not doing any meaningful acquisition for over 3 years now. So I feel good about that piece. On 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 number, a lot of them over the last 3 years. Just we can't get the valuations to make sense to us. And again, history will judge whether those were good deals or bad deals for whoever was successful, but we're not going to do dumb deals for the sake of doing deals. And hopefully, 3 years of not doing deals demonstrates to each of you that we're serious about that. So when we do, do something like Carrefour, it's not under the pressure of doing a deal. We would have 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.

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 and then Asia, a close second. And then I think you kind of thought about Europe as just being maybe more opportunistic. So 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 pursued Carrefour?

Yes. So 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 agent into Carrefour. So 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 is 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. And we're actively working that now, 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 look at Carrefour specifically, we'd always said we'd be opportunistic 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. And then I would also point out, Carrefour is much more than a France store. 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 and a nice ecosystem, not just large format but small format, grocery, omnichannel, financial services. So this was something that, again, we took our time, we understood it, and we think it would have brought a lot of value to us.

The next question will be from Karen Short at Barclays.

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? And then 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?

Yes. I'll answer the second one first. I would say we're very preliminary. Obviously, this just happened late last week. But 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." So what we've agreed to do is enter into exploratory conversations in the coming months. And we'll report back on that. But I'd say it's too early to go -- 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, and I certainly do believe that the pandemic has heightened the food security issue, particularly in France. And so whether that changes over time, it's hard to say. We'll continue to monitor that situation. But as of right now, we respect the position of the French government and we're acting accordingly.

And sorry, can I just do a quick follow-up? Do you -- could you remind us what your comfort level is on leverage just broadly? And I know you -- I think you want to maintain investment grade, but what would that mean in terms of like a peak leverage number, assuming you could pay it to get back down to investment grade over a certain period?

Yes. 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. So that is very much consistent with our conversations with the rating agency and our commitment to remain investment grade. So we were very prepared to make sure that the balance sheet remains strong and able to continue to grow both on the food side and on the convenience and fuel side if the right opportunities were in front of us.

Next question will be from Patricia Baker at Scotiabank.

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 in -- at Couche-Tard. Is there a possibility with these operational partnerships that you'll be able to garner some help there with the food -- the longer-term food journey?

It's a great question. I think on the procurement side, absolutely. We think they've got world-class procurement capabilities and great relationships with the farming communities around the world that they source from. So 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. So we need to make sure that we can really make meaningful value creation out of this. And again, I'd say, just remind, it's in the exploratory phase. But when I look at their -- just their operational competency around food, for those of you that have been in their stores, they're good. I mean they're doing a lot of things very well, very heavy presence particularly in the small format with grab-and-go meals, bakery. So I'd like to think there's some learnings there. I just -- I'd say it's a bit early to try to quantify anything.

Next question will be from Chris Li at Desjardins.

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 like the transaction and we'd love to do the transaction. So 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. So we'll stay tuned, and we'll see what happens. But for now, it's definitively closed.

Okay. And then you mentioned earlier just you -- in the past, you've looked at other things outside of convenience. I think you mentioned like dollar stores and others. Can you just repeat what else you looked at before?

Yes. I mean we -- again, some -- a lot of this is white paper exercise, Chris, looking globally at different channels, either emerging or existing. Travel retail would be another one. So you think about that small format existing in hospitals, train stations, airports. That's an area. The quick-serve restaurant business, another. And then I did mention dollar stores, which are very consolidated in Canada and the U.S. but a little more fragment in other parts of the world. So 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.

Next question will be from Graeme Kreindler at Eight Capital.

I wanted to follow up here given the respective geographical footprint of both Carrefour and Couche-Tard and Brian, your previous comments about adjacent retail opportunities. Wanted to get your thoughts on what 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.

Yes. 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 somebody -- 2 large companies coming together from both a procurement standpoint but then also leveraging each other's capabilities in private label and omnichannel formats. And so 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. But again, that's preliminary at this point. But I've seen what both Carrefour and other retailers have done globally, and this is happening at a more rapid pace. And I think it's something we have to be open to and give thoughtful consideration to.

Understood. And then 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?

Yes. 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. And 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. And some of those would absolutely have application in adjacent spaces. So 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 weed considered.

Next question will be from Michael Van Aelst at TD.

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, but 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 subsector of this?

It's a smaller subsector, Michael. Good to hear your voice. Some of these 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. So we've narrowed beyond that subset I went through to, I'd call it, 2 areas today that we think could make sense for us. But 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. And 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. But we've seen this pass as well, and coming out of it or coming out of some downturns in the economy have been some of the best times for Couche-Tard over our history. So 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. And so the 2 areas, I guess we can assume one is grocery. Are you willing to mention the other?

Not at this time, Michael. It's -- no. We had some activity in the space, and I really don't want to disrupt that.

Okay. And 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?

Yes, absolutely. Fundamentally, somebody said yesterday that people will still be eating 100 years from now. So is the negative posture around grocery overdone is the question. But when we looked at the synergies that we think existed between the 2 companies, hard synergies, not just what is -- the hard synergies, that alone got us to a very attractive place, and 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. And so with M&A appearing a little bit more difficult at this time and Couche-Tard having a very strong balance sheet with some good -- some very significant liquidity, what are your views on continuing to pursue M&A short term versus balancing out with maybe returning some material cash to shareholders while you...

The shareholder -- yes. Yes, we do have a buyback program in place. But -- so 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. Over my career or 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. And Claude is on the phone, too. If you want to add anything, Claude, feel free.

No, I think you said it well, Brian. And also -- yes, and that journey into M&A continue. And also, 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 are -- that could bring and still bring significant shareholder value to our shareholders. So yes, and like you said we're going to be opportunistic on our buyback.

Next question will be from Mark Petrie at CIBC.

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've put myself on mute, sorry about that, Mark. Yes. I mean 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. And 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. And 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 ball game. But 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. So in this context, I would call it, it's an and, not an or. We very much had this model to be able to do both and do both well.

Yes. If I can add also, Brian, is that we always have the focus also to bring our return on capital employed over 15%. And that's something that we've disclosed and we have been saying, and that's still true also in looking at other adjacent areas for M&A.

Okay. And then I wanted to just also follow up on the topic of sort of cultural fit. And just more broadly, not necessarily specific to Carrefour, but how do you sort of 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 9 years ago. The markets were skeptical about our ability to develop synergies. And we didn't just have 1 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. And I think -- and 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. And we found that, that fits, and it fit sort of 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, and that's a fine balance that we'll always continue to walk in our company. But it's worked well. We doubled the EBITDA in Europe with the same management team that was there 9 years ago. And while Carrefour was certainly bigger, we think that, that same journey could absolutely happen there.

Okay. And if I could just ask one more just with regards to sort of evaluating these sort of newer growth engine opportunities outside of kind of the core legacy business. Could you just elaborate and come back to sort of the specific criteria for how you would evaluate that? Presumably, there are parts of retail that are too different from the legacy business. But just how do you specifically evaluate how these would leverage your core competencies?

It's a good question. I would say the theme -- 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. So everything we've looked at has really had that common theme. We think that's where we've 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. So I would say food is the common theme there across everything we've looked at and then 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 of areas we've referenced, those would be the couple of themes. And then what's got to come out of that is a belief that the synergies and the acquisition price are right to be able to derisk the project significantly and deliver really strong return profiles for Couche-Tard shareholders.

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 so -- and also the return, like I just mentioned before, continue to provide the return on capital investment that is meaningful. And also, we like the concepts that are resistant to harder time, to recession and things like that. So that could explain a bit our interest into grocery.

Next question will be from Vishal Shreedhar at National Bank of Canada.

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 in your -- that you can review, which are meaningful, regarding acquisitions? Or is this more of a lull at the moment?

I would say the first 90 -- Vishal, the first 90 days of the pandemic, the world kind of locked up. But we've actually seen pretty solid deal flow over the last 6 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. But no, I would say the market is pretty robust right now.

Okay. And this is more of a longer-term question, just trying to 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? Or will it accept lower growth in the interim until acquisition multiples come down more consistent with its understanding?

I think it's a bulk 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 5 countries and see somewhere around 500 stores. So that's really -- our due diligence, I think, has been a foundation of how we've derisked transactions, whether that be in our existing space or something else we're looking at. So 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. And hopefully, you've seen, the last 3 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 were too expensive for us. So we'll balance those, but our approach to M&A, whether it be in our core business or in an adjacent space, will absolutely remain consistent.

At this time, we have no other questions. Please proceed.

Jean Marc?

Yes, 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. So if I may add, the founders remain committed for the long term. So -- and the Board was very, very supportive for this acquisition. We're very serious about 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.