The parent company of 7-Eleven said Alimentation Couche-Tard agreed to consider divesting about 2,000 Circle K stores in the United States to address potential antitrust concerns that could torpedo a merger of the companies.
Seven & I Holdings said in a letter sent to shareholders Monday that it won’t agree to a sale to Couche-Tard unless the Canadian company takes steps related to potential antitrust issues. Couche-Tard last year offered US$47 billion to acquire Seven & I, owner of 7-Eleven, the world’s largest convenience store chain. Seven & I formed a special committee from its board of directors to consider the offer.
In the shareholder letter, Seven & I raised the specter of Kroger’s failed US$24.6 billion bid to acquire rival supermarket chain Albertsons. A federal judge in December blocked what would have been the largest supermarket merger in U.S. history, citing antitrust concerns.
“The cautionary tale of the Albertsons-Kroger transaction clearly demonstrates the risks of consumer-facing retailers looking to divest thousands of stores without a buyer that is market-tested and well positioned to preserve the competitive landscape,” Tokyo-based Seven & I said in the letter.
“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 said.
Seven & I had 13,145 convenience store locations under 7-Eleven, Speedway and other brands in the U.S. and Canada as of September 2024, according to the company's investor presentation from last week. Couche-Tard operates about 7,100 stores in the U.S. and 2,100 stores in Canada under the Circle K name and other brands.
Seven & I proposed three options for Couche-Tard to consider. One would be to divest all its stores in the U.S., including Circle K and other brands, “in a ‘clean sweep,’ taking U.S. antitrust risk off the table,” Seven & I said in the shareholder letter.
The second option would be for Couche-Tard to sign a definitive agreement to sell its stores “as a condition precedent to the signing of a definitive merger agreement” with Seven & I.
In the third option, Couche-Tard and Seven & I could “immediately map out the viability of a divestiture process” without waiting for a definitive agreement to sell stores. The option would include “defining operational, management and financial characteristics of the group of stores to be sold and identifying potential buyers."
“This would provide some insight into the prospects of success along terms that had a reasonable likelihood of satisfying U.S. antitrust regulators and court challenge,” Seven & I said.
Couche-Tard has agreed to consider the third option, and the companies’ financial advisers have begun talks to discuss the matter, Seven & I said. Seven & I did not identify the financial advisers. Couche-Tard, based in Laval, Quebec, did not respond to CoStar News' request for comment.
Last week, Seven & I took another step to address potential concerns about the Couche-Tard bid when it named former Walmart executive Stephen Dacus as CEO, the first American to hold the position. Dacus will spearhead an effort to spin off Seven & I’s convenience store business through an initial public offering. Dacus will replace Ryuichi Isaka, who is stepping down in May.
Seven & I also said last week that it agreed to sell its superstore operations and other non-7-Eleven businesses to Bain Capital for US$5.4 billion.
Since receiving the unsolicited bid from Couche-Tard last year, Seven & I explored a potential buyout from the company’s founding Ito family but failed to secure necessary financing.
Seven & I also acknowledged in the Monday shareholder letter that institutional shareholder Artisan Partners opposes its plan to name Dacus CEO and wants Seven & I to seriously consider Couche-Tard’s bid.
“We are disappointed that Artisan has prejudged our commitment to pursuing all paths to unlock shareholder value without knowing all the facts,” Seven & I said.
Artisan Partners, based in Milwaukee, did not respond to a request for comment.