The future of 7-Eleven, the nation’s largest convenience store chain, remains up in the air amid an international bidding war involving the parent company’s management, a rival bid from the owner of one of its major domestic rivals and a plan that could take the company public in the U.S.
Add it all together and you get one of the most complicated global corporate buyout sagas in years, one involving major competitors to U.S. restaurants that are owned by companies in Japan and Canada.
Let’s update you on all we know, thanks mostly to our friends and colleagues over at CSP Daily News.
The tale began over the summer, when Alimentation Couche-Tard, a Canadian company that owns Circle K, proposed to buy Seven and i Holdings, the Japanese company that owns 7-Eleven, for $37 billion.
The proposal itself was a daring one. Both companies are massive operators of convenience- store chains around the world.
Seven and i owns 7-Eleven, the grocery store brand Ito-Yokado and Denny’s Japan, among other things. 7-Eleven operates 83,000 convenience stores around the world, including more than 13,000 in the U.S., and it operates the Speedway and Stripes convenience-store concepts, not to mention some restaurant brands: Laredo Taco Company, Speedy Café and Raise the Roost Chicken and Biscuits.
7-Eleven is the largest convenience-store chain in the U.S. based on store count, according to CSP Daily News.
No. 2? That would be Circle K. Couche-Tard operates 16,700 convenience stores in 29 countries, including more than 7,100 in the U.S.
Couche-Tard has described its offer as “friendly.”
Friendly or not, Seven and i turned the offer down, saying it undervalued the company.
Seven and i then countered with a restructuring plan that would spin off its ancillary businesses, notably Ito-Yokado and various other subsidiaries. An activist investor, Artisan Partners International, called that proposal “too little, too late.”
“We continue to have strong conviction that a combination with Seven and i has clear strategic and financial benefits for both companies’ customers, employees, franchisees and shareholders,” the Couche-Tard board of directors said in September.
Couche-Tard then raised its offer price to $47 billion, according to reports. That led Seven and i to form a special committee to consider the offer.
And then last month, company management, including members of Seven and i and the Ito family, came forward with $60 billion management buyout that would effectively take the company private.
Which brings us to the most recent update. The management buyout plan could include a U.S. IPO of 7-Eleven’s North American convenience-store business, which would raise $6.6 billion to help pay off loans to be used to finance the buyout.
As such, the special committee at Seven and i is considering three options: A buyout from one of its top competitors; a corporate restructuring or a debt-heavy management-led buyout and U.S. IPO.
The wildcard in all this, meanwhile, could be the U.S. government. Combining the country’s two largest convenience-store operators would likely result in regulatory scrutiny. (A proposal to merge the country's two largest grocers, Kroger and Albertsons, is currently making its way through the courts.) That said, Couche-Tard doesn’t seem all that worried about it.
“The U.S. convenience-store market is highly fragmented, with over 150,000 stores nationally,” Couche-Tard’s board said. “Both Couche-Tard’s and Seven and i’s stores operate in the U.S. in competition with a wide array of brick-and-mortar and online food and merchandise providers. Additionally, Seven and i and Couche-Tard largely operate in complementary markets across the U.S.”
The company would consider divestitures to get the issue through those regulatory hurdles.
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