Couche-Tard: The Ultimate Industry Consolidator
As the convenience store industry converges on Las Vegas for the annual NACS Show this month, the hottest topic on the convention floor is likely going to be Alimentation Couche-Tard Inc.'s bid to acquire 7-Eleven Inc.'s Japan-based parent company, Seven & i Holdings Co.
Although the Seven & i board of directors last month rejected the Canadian- based retailer's "friendly" offer, I don't think we've heard the last of this potential blockbuster deal, which would combine the No. 1 c-store chain in the United States — 7-Eleven Inc. (12,000-plus U.S. stores) — with No. 2 Couche-Tard (5,851 U.S. locations).
As reported by CSNews.com, Couche-Tard, parent company of the Circle K brand of convenience stores, said it remains "highly focused on consummating a transaction with Seven & i that is in the best interests of all constituencies ... and ensuring that the combined entity continues to be the leader and provider of premier offerings in the markets we both serve."
Couche-Tard can be persistent. I remember back in 2010, Couche-Tard's effort to purchase Casey's General Stores Inc. — which at the time would have resulted in the merger of two of the largest c-store chains in the country — turned into a hostile takeover that was only thwarted when Casey's enacted a series of poison pill defenses.
Analysts interviewed by Convenience Store News appear to suggest that even if the deal doesn't go down now, there's a good possibility of the merger being consummated sometime over the next 12 months. There's even some sentiment among merger and acquisition experts that this union would be good for the industry overall. They opine that a combined 7-Eleven/Circle K national chain would bring consistency to the highly fragmented convenience channel that is comprised mostly of independents and single-store owners.
[Read more: Alimentation Couche-Tard Ups Bid for 7-Eleven Parent Company]
"It's going to help the consumer because they'll have some consistency," Terry Monroe of American Business Brokers & Advisors, told CSNews, adding that if Couche-Tard pulls off the deal, it will bring consistency with a national offer.
I'm not convinced of that. Almost every market in the country already has a superior c-store brand at which to shop, whether it's Wawa, Sheetz, Rutter's, Parker's, Kwik Trip, QuikTrip, ampm or RaceTrac, among many others. By those analysts' line of thinking, Walmart's growth was a boon to the mom-and-pop retail segment and Walgreens' expansion was good for the neighborhood drugstore business.
I can't pretend to know how this deal will shake out. There are, of course, huge antitrust hurdles in the U.S. to be overcome. One thing I can predict is that if the merger doesn't happen, watch for Couche-Tard to turn its attention to any number of other large, modern c-store chains. After all, it has the cash and if history is any indication, the retailer embarked on a series of acquisitions following its failed takeover attempt of Casey's 14 years ago.
Whatever happens, Couche-Tard will be an aggressive industry consolidator.
