Alimentation Couche-Tard Steps Up Attempts To Gulp Up 7-Eleven

Attempts to push through the biggest ever foreign acquisition of a Japanese business have taken another possible step forward after Alimentation Couche-Tard executives met privately with key Seven & i Holdings’ shareholders according to Bloomberg.

The Canadian retailer is ramping up its efforts to acquire the Japanese operator of 7-Eleven convenience stores for nearly $50 billion in a deal that will combine the c-store powerhouse with ACT’s Circle K brand.

Undaunted by Seven & i rebuttals so far, Couche-Tard founder and chair Alain Bouchard has been on a publicity charm offensive in the past weeks and met privately with some Seven & i shareholders in Tokyo last week to set out the case for why they should agree to the takeover, according to the reports.

Couche-Tard submitted a new, yen-denominated non-binding proposal on Jan. 24, based on its previously indicated price of $18.19 per share.

Meantime, the Canadian convenience store retailer and gas station operator has been at pains to reassure the public and key stakeholders that it is not considering a hostile takeover, despite a months-long standoff with Seven & i, which began last summer. Bouchard also raised the carrot of an even more attractive offer should Seven & i disclose its financials.

“We may be able to enhance our proposal through due diligence access to financials,” Bouchard said at a press conference in Tokyo earlier this month, where he was joined by Chief Executive Officer Alex Miller and Chief Financial Officer Filipe Da Silva to promote the bid.

Alimentation Couche-Tard Proposal

The takeover proposal from Couche-Tard first came to light in August but so far Seven & i has rebuffed all approaches, citing uncertainties over clearing U.S. antitrust hurdles because of the potentially dominant position of the combined businesses in North America.

In response, Couche-Tard has agreed to seek a buyer for some of its stores in advance of any potential deal, a fairly standard move for major consolidations of rival retail businesses.

Ever since Couche-Tard’s approach became public, the operator of 7-Eleven stores has sought to make a case for remaining independent. Seven & i announced major changes, including board director Stephen Dacus taking over as chief executive officer, the sale of its superstore business for $5.4 billion, a share buyback program, and a listing of its U.S. business.

Seven & i has insisted that it is engaging with Couche-Tard but the collapse of a management buyout plan aimed at fending off Couche-Tard has left Seven & i facing increasing pressure to engage in talks following a possible Moody’s downgrade, and despite the management shake-up Seven & i’s shares are still trading more than 20% below Couche-Tard’s offer.

Alimentation Couche-Tard Sees Value

The consensus is that Seven & i is worth more than its current ¥5.6 trillion market value and some analysts believe that one of the major motivations for ACT is that it simply sees an under-valued business. ACT has about 16,700 stores globally, far fewer than Seven & i Holdings’ approximately 85,500 stores globally, but the Canadian firm has a significantly higher valuation of $54 billion, compared with the Tokyo-listed company’s $38.3 billion.

Furthermore, the consensus is that Seven & I has done a great job in turning 7-Eleven into a well-oiled powerhouse in the convenience store market, meaning there are few obvious operational efficiencies any new owner could introduce.

If Bouchard gets his way, it will soon be part of a Alimentation Couche-Tard led convenience store super group and, with more than a little irony, U.S. shoppers will be getting their Big Gulp from a Canadian giant intent on drinking in America’s thirst for the 7-Eleven brand.