Couche-Tard bid to take over Japan's Seven & i Holdings
Alimentation Couche-Tard Inc., the Canadian operator of Circle K stores, has made a $47 billion bid to acquire Japan’s Seven & i Holdings, the owner of 7-Eleven. If successful, the deal would create the world’s largest convenience store operator, with about 100,000 locations globally. This marks one of the largest foreign takeover attempts in Japan.
Couche Tard is attempting its third approach to Seven & i Holdings since 2005. This time the offer is 22% higher than Couche-Tard’s previous $38.6 billion bid in August 2024, which Seven & i Holdings rejected, because of undervaluation and regulatory concerns. Seven & i has a diverse portfolio, including supermarkets, retail chains, and financial services, but it has faced pressure from shareholders to focus on its flagship 7-Eleven stores.
The proposed takeover faces many challenges, including Japan's cautious stance on foreign acquisitions and the complex U.S. antitrust review process, which would require a substantial premium to justify the added time and risk. While Seven & i has historically resisted change, recent reforms in Japan's corporate governance have made such deals more feasible.
Seven & i is restructuring to boost shareholder value, including plans to separate its supermarket and non-core businesses into a new entity, York Holdings, and rebrand itself as 7-Eleven Corp. However, activist investors have criticized the company’s slow pace of reform. The Japanese firm also recently announced the closure of 444 underperforming U.S. stores while planning to open 500 new locations by 2027.
For Couche-Tard, acquiring Seven & i would significantly expand its footprint, adding 85,800 stores to its network of 16,800 across 31 countries. In the U.S. alone, 7-Eleven operates 13,229 stores, covering 51% of the population within a two-mile radius.
The deal’s potential $6.5 billion in annual operating profits, combined with $2.2 billion in estimated cost synergies, could strengthen Couche-Tard's financial standing, but Bloomberg warn that in the short-term this is not enough to generate enough capital to make up for the loss.
Looking Ahead
In 2021, Couche-Tard tried to buy French grocery chain Carrefour SA but abandoned the talks after French Finance Minister Bruno Le Maire blocked the potential $25 billion deal, citing concerns over food security. What needs to change to ensure this bid doesn’t meet the same fate?
According to Bloomberg, in order for this acquisition to pull through, Seven & i Holdings needs to prove its value rather than relying on its status as "core" to Japan’s national interests. “The case rest on value” and Seven & i Holdings has the right strategy in place: they are expanding globally, Governance has improved with the appointment of a chair separate from the chief executive officer role, along with an independent strategy committee. However, Seven & i Holdings needs to deliver more results. Mixed messages about its superstores have raised doubts, and the company must now act decisively. Selling non-core assets, such as its 50% stake in Seven Bank, could unlock significant value quickly, while streamlining operations in underperforming U.S. 7-Eleven stores could boost profitability.
CEO Ryuichi Isaka faces pressure to win investor confidence, and tying management incentives to strategy execution could help. If Couche-Tard is unwilling to pay a fair price, shareholders may ultimately prefer no deal to an undervalued one.
Looking at the broader picture, the proposed acquisition has proved to the world that Japan is evolving and is starting to open to foreign acquisitions. The future of the deal relies on Couche-Tard’s willingness to increase its bid and Seven & i Holdings’s ability to demonstrate value by increasing profits. For now, shareholders are closely watching whether Couche-Tard will sweeten its offer to seal the historic deal.