Circle-K's Pursuit of 7-11
Part 1: A shark eating a whale
A Takeover in the Making
Couche-Tard is a Canadian convenience store company that has a long history of growth through acquisition. The company's 2024 bid for 7-Eleven is its third attempt to acquire the Japanese retailer in the past two decades. Couche-Tard's chairman, Alain Bouchard, stated that the company wants to buy all of Seven & i Holdings, 7-Eleven's parent company, and keep its local operations intact.
Couche-Tard believes it can overcome antitrust concerns, given its history of success in working with the US Federal Trade Commission (FTC). However, Seven & i has not been receptive to the offer, declining to meet with Couche-Tard's management team during their visit to Japan. Instead, Seven & i is undergoing a restructuring plan to split the company in two in an effort to fend off Couche-Tard.
Acquisition Timeline
While the acquisition attempt from Couche-Tard officially started in August, I believe a more complete timeline for what is evolving with Seven &i should start with activist investor Value Act Capital Management. There has been a recent flurry of activity and news which has prompted my attention to dive deeper into this acquisition now rather than wait for more details which should come over the next year or more.
May 2021: ValueAct Capital Management takes a 4.4% stake in Seven & i Holdings, suggesting that a spin-off of the 7-Eleven chain could unlock significant value.
January 25, 2022: ValueAct releases an open letter to Seven & i’s Board, requesting direct input from top shareholders on strategy and governance and the formation of an independent committee to assess strategic alternatives.
February 3, 2022: Seven & i publicly denies both of ValueAct's requests. ValueAct issues a presentation urging Seven & i to transform into a global champion, focusing solely on 7-Eleven and divesting non-core businesses.
August 19, 2024: Couche-Tard, the parent company of Circle K, submits a non-binding proposal to acquire Seven & i Holdings.
Late August/Early September 2024: Seven & i rejects Couche-Tard’s initial offer, considering it too low. Couche-Tard subsequently raises its bid to $18.19 per share, valuing Seven & i at approximately $47.2 billion.
September 4, 2024: Artisan Partners, another Seven & i shareholder, urges the company to immediately negotiate with Couche-Tard to maximize shareholder value.
September 10, 2024: The U.S. Federal Trade Commission (FTC) initiates an investigation into the potential acquisition due to antitrust concerns.
Early-to-mid September 2024: Seven & i is reported to be seeking government protection from a Couche-Tard buyout by requesting a reclassification of 7-Eleven’s status under Japan’s Foreign Exchange and Foreign Trade Act, which would allow the government to intervene in the deal.
October 6, 2024: Caisse de dépôt et placement du Québec (CDPQ), one of Couche-Tard’s largest shareholders, expresses its willingness to provide financial backing for a potential acquisition of Seven & i.
October 10, 2024: To fend off Couche-Tard, Seven & i announces the creation of a separate company for its non-convenience-store businesses, called York Holdings Co. This restructuring aims to streamline operations and focus on convenience stores.
October 11, 2024: 7-Eleven announces the closure of 444 stores in North America as part of a broader strategic shift to improve profits amid falling traffic and the takeover bid.
October 2024: Investor ValueAct Capital renews its call to shareholders of Seven & i Holdings Co. to support a spin-off of the convenience store chain. Seven & i announces its decision to split into two businesses, one focused on 7-Eleven and the other a collection of 31 less profitable retail operations.
November 2024: Reports of a $58 billion management buyout to take itself private with funding from banks, Itochu Corp. and the founding Ito family. At the same time, some indications of primarily conversations with Couche-Tard were reported.
The Shark
A Brief History of A Quebec Darling
Alimentation Couche-Tard Inc. was founded in 1980 in Quebec, Canada. It began as a single convenience store and has since become a global leader in the convenience store industry. The company operates a network of nearly 17,000 stores.
The company's growth has been fueled by a combination of organic expansion and a series of small and large acquisitions. Couche-Tard's success can be attributed to several factors: