Hong Kong-based supply chain management company Li & Fung is planning to sell 340 of its Circle K stores in the city to Canadian convenience store operator Alimentation Couche-Tard (ACT) for $361 million. The deal will see part of the operations of the Hong Kong stores go back to the brand's original owners.
ACT first founded the Circle K brand in Quebec in 1951. Hong Kong's Li & Fung brought the brand to China in 1985. Since then, Circle K has become the second-largest convenience store chain in Hong Kong, right behind 7-Eleven.
"Circle K Hong Kong is one of the best convenience store operators in Asia. The company will reach a milestone in its strategic ambition of entering the high-growth Asia-Pacific market," ACT's president and chief executive officer, Brian Hannasch, said on Thursday.
Convenience Retail Asia, Li & Fung's retail arm, said that the ongoing disruptions caused by the coronavirus and the political tensions in the city had forced it to conduct a comprehensive review of its business. In its findings, published in an interim report, the company said that its Circle K brand has been experiencing "stagnation in profit" due to the decline in store traffic due to the pandemic and other factors.
The company's report coincides with a sharp fall in retail sales in Hong Kong last over the past few months. In September, retail sales in the city declined by more than 12.9% when compared to the same month last year. It also marked the 20th month of decline as the pandemic continued to stifle spending and tourism.
Convenience Retail Asia said that despite the situation, its stores were still able to report marginal sales growth over the first half of 2020. If the deal pushes through, the proceeds of the sale will be allocated as a special cash dividend of HK$3.85 per share.
The company said that it plans to focus more on its other retail brands, particularly its Saint Honore and Mon Cher bakeries and its glasses retail brand Zoff. It said that the businesses will likely prove to be much more resilient to the current environment as they do not heavily rely on tourism.
Convenience Retail Asia jumped by 17.6% following the announcement on Thursday. The stock surged from a Wednesday close of HK$4.06 per share to a Thursday opening of HK$4.94 per share. The stock hovered around HK$4.71 per share by Friday's mid-day trading.
