Seven & i Holdings & Couche-Tard Explore Possible Divestitures
TOKYO — Seven & i Holdings Co. Ltd. is teaming up with Alimentation Couche-Tard Inc. (ACT) to assess the viability of a divestment process in the event of a merger. This includes defining operational, management and financial characteristics of the group of stores to be sold and identifying potential buyers.
While no definitive merger agreement has been signed or recommended, this step will provide some insight into the prospects of success along terms that had a reasonable likelihood of satisfying U.S. antitrust regulators and court challenge, according to 7-Eleven Inc.'s parent company.
A Timeline of Updates
Seven & i provided an update on its discussions with Couche-Tard in a March 9 letter to shareholders. In the letter, the company noted that a consistent threshold issue it had raised from the beginning was how to put together a divestiture package of 2,000 or more overlapping convenience stores that could be sold to a "viable, credible and independent buyer" in a way that would assure future competition between such a buyer and Couche-Tard.
In the letter, signed by Paul Yonamine, chair of the special committee created to evaluate an acquisition, and Meyumi Yamada, chair Seven & i's nomination committee, Seven & i said "it has taken to come time" to reach constructive engagement with Couche-Tard.
"Until recently, however, ACT's position had been that Seven & i should first sign a deal to be acquired by ACT and then either spin out overlapping stores or try to find a divestiture buyer only after signing a definitive agreement. This would have put an unacceptable burden of risk on Seven & i that the transaction will not be realized," the letter read.
Alternate actionable paths that Seven & i proposed to Couche-Tard included:
- Couche-Tard divesting all U.S. stores, including Circle K branded locations, in a "clean sweep" that would take U.S. antitrust risk off the table; or
- Couche-Tard executing a definitive divestiture agreement with a buyer of the 2,000 or more divestiture stores as a condition precedent to the signing of a definitive merger agreement between Couche-Tard and Seven & i.
Now that Couche-Tard has agreed to mutually explore a divestiture process, Seven & i and its advisors believe it can make progress toward determining whether a credible and actionable remedy and divestiture package can be achieved that would allow a realistic assessment of Couche-Tard's proposal under the areas of value and certainty of closing.
The company pointed to the recent failed merger of Albertsons and Kroger grocery stores as a warning for retailers looking to divest thousands of locations without a market-tested buyer that is well positioned to preserve the competitive landscape.
"As responsible stewards of our shareholders' capital, we will not blindly enter a transaction with no clear path to closing that could leave our company in a value destructive limbo for multiple years," Seven & i wrote.
Seven & i subsidiary 7-Eleven Inc. operates, franchises and/or licenses more than 13,000 stores in the United States and Canada. In addition to 7-Eleven stores, it operates and franchises Speedway, Stripes, Laredo Taco Co., and Raise the Roost Chicken and Biscuits locations.
Laval-based Alimentation Couche-Tard operates in 31 countries and territories, with more than 16,800 stores, of which approximately 13,000 offer road transportation fuel. With its well-known Couche-Tard and Circle K banners, it is one of the largest independent convenience store operators in the United States and it is a leader in the convenience store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, Belgium, as well as in Ireland.
