The Japanese parent company of the global convenience store chain, 7-Eleven, confirmed on August 19 that it had received an acquisition proposal from Alimentation Couche-Tard (ACT), the owner of Circle K.
The confirmation was made through Seven & i Holdings’ website, revealing that the proposal is to acquire all outstanding shares of the company, which could lead to a merger of a firm with over 85,000 7-Eleven convenience stores worldwide, as well as the largest ever foreign takeover of a Japanese company, if agreed. The first Japanese store opened in 1974, but the company was first founded in Dallas in 1927.
Canada-headquartered ACT also confirmed that it had submitted a “friendly, non-binding” proposal, and that it is hoping to reach a mutually agreeable transaction that benefits both parties.
Both sides said that no decision or agreement on the buyout proposal has been reached at this stage.
Seven & i has established a special committee of the board of directors, comprised solely of independent outside directors, to review the proposal. A response would be made to ACT, it said, however, no timeline has yet been provided at press time.
The proposal is said to value Seven & i at the equivalent of around $31 billion, according to calculations of its market capitalisation before the news of the acquisition bid was first reported by the media. However, not terms have been made public.
The operating profit of domestic 7-Eleven stores in Japan reached ¥250.5 billion during the financial year until end-February 2024, an increase of 8% over the previous year. Overseas stores operations contributed another ¥301.6 billion operating profit for the group, with a presence in markets including Thailand, mainland China, Hong Kong and the US.
ACT operates some 16,900 chain stores globally under the brands of Couche-Tard, Circle K and Ingo. Cash and cash equivalents of ACT were$1.3 billion, according to its 2024 annual report; its leverage ratio stood at 2.21.
Despite chain stores not being as popular to own as they once were, earlier this week, ACT’s market capitalisation stood at C$77.9 billion ($57.1 billion), higher than that of Seven & i’s at ¥5.2 trillion ($35.6 billion).
The latter’s shares jumped by 22% on Monday (August 19) on the news of this proposal, reaching around ¥2,000 per share, a high level most recently recorded in April.
Takeover guidelines
In August 2023, the Ministry of Economy, Trade and Industry (METI) its new guidelines for corporate takeovers, providing clear frameworks around inbound public mergers and acquisitions (M&A) for international buyers looking to acquire Japanese listed companies.
This has created a more favourable regulatory environment for a foreign takeover by Canada’s ACT in Japan, which in the past might be rejected by a more protectionist Japanese government.
In another potential twist, Japan is set to elect a new prime minister in September after Fumio Kishida, a member of the ruling Liberal Democratic Party, decided to step down that month, ending a three-year term.
However, there could be opposition from regulators of individual markets, including the US, while in Asia a market such as Hong Kong already sees Circle K and 7-Eleven dominant in the high streets causing. There are, surely, anti-competition issues to be addressed caused by a potential reduction in choice for consumers.
Also in Asia, Circle K has operations in Macau, Vietnam, Indonesia, a market which 7-Eleven struggled in previously, and Cambodia.
The market size of global convenience stores is projected to grow by $930 billion between 2023 and 2028, mainly driven by the increasing demand for convenient food products, and also more opportunities to cross-sell other services. And 35% of this growth will originate from the Asia Pacific (Apac) region, according to research.
