In a deal that could mark the largest-ever foreign takeover of a Japanese company, the Canadian owner of Circle K convenience stores is making moves to acquire the Japanese parent company of 7-Eleven. Both companies confirmed yesterday (Aug. 19) that the Tokyo-based Seven & I Holdings has received a confidential, non-binding and preliminary acquisition proposal from the Quebec-based Alimentation Couche-Tard.
Couche-Tard, which is currently valued at $57 billion, has not yet disclosed the financial terms of its offer. But Seven & I’s market cap of 5 trillion Japanese Yen ($36 billion) suggests that a buyout deal would reportedly surpass the $18 billion sale of Toshiba’s semiconductor business to a group led by Bain Capital in 2018, which currently stands as the largest buyout of a Japanese company by an overseas entity.
The acquisition would also be the largest in Couche-Tard’s history, according to an investor note from Bobby Griffin, an analyst at Raymond James. “While there is very limited available information on the proposed acquisition, the potential deal would be significant across the global convenience store industry,” said Griffin, adding that the acquisition “would substantially increase Couche-Tard’s global scale.”
This isn’t the first time Couche-Tard, founded and chaired by billionaire Alain Bouchard, has considered taking over the 7-Eleven operator. Seven & I counts the family of the late businessman Masatoshi Ito, who died last year with an estimated net worth of $4.4 billion, as its second-largest shareholder. In 2005, Bouchard reportedly approached Ito and suggested their companies merge. At the time, Couche-Tard operated some 1,600 Circle K sites in the U.S., while Seven & I had around 5,800 7-Eleven stores in the country. Ito rejected the offer, however, and told Bouchard that both companies should work on increasing their U.S. standing before considering such a deal.
Nearly two decades later, Couche-Tard and Seven & I appear to have done just that. In addition to becoming the second largest convenience store operator in the U.S. behind Seven & I, Couche-Tard has displayed a “track record” in mergers and acquisitions by closing 75 deals since 2004, according to an investor note from Shunsuke Kuriyama, an analyst for Jefferies. However, the merging of the two most significant convenience store players in America will likely draw competition law scrutiny.
Couche-Tard operates 16,700 stores globally, including more than 7,000 in the U.S. Seven & I operates more than 84,000 in total with 13,000 in America. Together, they would encompass some 20,000 stores in the U.S.—more than ten times the number of stores operated by Casey’s, currently the third largest player in the country, behind Seven & I and Couche-Tard.
Antitrust regulators in the U.S. will likely challenge a proposal to combine the companies, according to the Financial Times, which cited people familiar with the matter and noted that a buyout is additionally expected to also raise eyebrows for antitrust authorities in Japan. “Barring possible the price of the transaction and potential antitrust matter, we think this is a plausible proposal,” Jefferies’ Kuriyama wrote.
