Seven & i Holdings Co. Ltd., the Tokyo-based parent company of the 7-Eleven convenience-store chain, is considering ways to block a takeover bid from Alimentation Couche-Tard Inc., the parent company of the Circle K convenience-store brand, according to a Bloomberg report.
Earlier this month, Couche-Tard submitted a nonbinding proposal to acquire Seven & i, a deal estimated at $38 billion. Seven & i has confirmed that it has received the proposal and that it has created a special independent committee to review the offer.
Seven & i is seeking reclassification of 7-Eleven’s status from a “non-core” to “core” rating or “protected” status under Japan’s Foreign Exchange and Foreign Trade Act, insider sources told the newspaper. That change would allow the government to weigh in on the deal if the parties reach an agreement, said the report. It would require prior notification of any purchase of its shares above 10%.
Core industries include sectors such as aerospace, nuclear energy and rare earths. The law was designed to protect the country from security risks, such as the outflow of military technology, the report said.
Seven & i hares dropped as much as 4% after the operator of 7-Eleven stores asked Japan’s government for a designation that would raise potential hurdles for a takeover, said the new agency. The stock has risen 19% since Couche-Tard’s buyout proposal on Aug. 19, rebounding from 30-month lows.
Japan’s Ministry of Finance has not indicated publicly whether it will consider Seven & i's application for core status.
“The category is usually reserved for essential industries such as military and energy, but it does clearly show how anti-takeover the company is as they are effectively asking for government protection to ward off the approach,” Andrew Jackson, head of Japan equity strategy at Ortus Advisors wrote in a note cited by Bloomberg.
The deal will face Federal Trade Commission (FTC) scrutiny in the United States over potential competitive concerns and could require divestment of stores by either or both companies to avoid antitrust issues. In 2021, 7-Eleven and Marathon Petroleum agreed to divest 293 convenience stores in local markets across 20 states to settle FTC concerns that 7-Eleven’s acquisition of Speedway violated federal antitrust laws.
“[Couche-Tard] would still own just a small portion of convenience stores and gas stations in the U.S. if this deal went through,”Barry Schwartz, Chief Investment Officer and portfolio manager at Baskin Wealth Management, told Bloomberg Television’s Trading Day. “It would only own 13% of the market share. So there is still lots of runway for growth if this happens, but that's a big ‘if.’ There’s so many hurdles to go through.”
He referred to the Kroger-Albertsons supermarket merger deal, first announced in 2022 but still under FTC scrutiny. “It could take two to three years before it could go through for Couche-Tard, so let's hold our horses.”
He speculated how the Couche-Tard bid for 7-Eleven might spin out.
“Couche-Tard are excellent operators. They don't make an acquisition like this doubling the size of the company without doing a ton of due diligence,” said Schwartz. “What I would suspect is the opening shot is a friendly deal, then possibly hostile, then possibly work maybe just to acquire the U.S. and non-Japanese part of its portfolio, which is what Couche-Tard really, really wants. There are some amazing, high-quality assets inside 7-Eleven [and Speedway] in the U.S.”
- 7-Eleven is No. 1 on CSP’s 2024 Top 202 ranking of U.S. c-store chains by store count. Alimentation Couche-Tard is No. 2.
Seven & i is a global operator of convenience stores, superstores, supermarkets, specialty stores, foodservices, financial services and IT services. 7–Eleven International LLC franchises or licenses more than 44,000 stores in 19 countries and regions, including Australia, Cambodia, China (including Hong Kong/Macau, Taiwan and other areas), Denmark, India, Israel, Laos, Malaysia, Norway, Philippines, Singapore, South Korea, Sweden, Thailand and Vietnam. The brand also operates corporate or franchise stores in the United States, Canada, Mexico and Japan. Globally, the 7-Eleven trademark is represented in approximately 83,000 stores.
Irving, Texas-based 7-Eleven Inc. operates, franchises or licenses more than 83,000 convenience stores in 19 countries and regions, including more than 13,000 7-Eleven convenience stores in the United States. In addition to 7-Eleven c-stores, the company operates and franchises Speedway and Stripes c-stores and the Laredo Taco Company, Speedy Cafe and Raise the Roost Chicken and Biscuits restaurant brands..
Laval, Quebec-based Couche-Tard operates in 31 countries and territories, with more than 16,700 stores. Its network includes more than 7,100 stores in the United States under the Circle K and Holiday Stationstores banners, and approximately 2,100 in Canada under the Circle K and Couche-Tard banners. In Europe, under the Circle K and other banners, Couche-Tard operates a retail network in Scandinavia, Ireland, Poland, the Baltics and Russia with more than 2,700 stores and automated fuel stations. Through licensing agreements, more than 2,200 stores operate under the Circle K banner in 15 other countries and territories (Cambodia, Egypt, Guam, Guatemala, Honduras, Hong Kong, Indonesia, Jamaica, Macau, Mexico, Mongolia, New Zealand, Saudi Arabia, the United Arab Emirates and Vietnam). This brings Couche-Tard’s total worldwide network to approximately 14,400 stores.
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