A Couche-Tard sign in Montreal in September, 2024.Christinne Muschi/The Canadian Press
Alimentation Couche-Tard Inc. ATD-T is pushing on with a pursuit of Seven & i Holdings Co. Ltd. SVNDY but scouting for other acquisition opportunities across the globe as it faces a Japanese target with serious reservations about a takeover.
The convenience store giant based in Laval, Que., has made an offer worth about US$50-billion for Seven & i, owner of the 7-Eleven chain. But it has not yet had access to confidential data for due diligence or been able to engage in substantive discussions toward a deal, partly because Seven & i won’t offer such access without greater certainty that a tie-up could pass antitrust hurdles in the United States.
Still, things are moving ahead even if it’s not at a pace Couche-Tard executives might like. The two companies signed what is known as a joint defence pact earlier this year whereby they agreed to exchange certain information related to antitrust issues and they’re working together with investment bankers on soliciting buyers for stores they might have to divest, according to a person familiar with the matter.
It is not a full-blown non-disclosure agreement involving a comprehensive sharing of sensitive information but rather a more limited one related to potential competition issues, the source said. The Japanese company sees obtaining regulatory approval as a “threshold issue” that needs to be resolved before it commits to move forward in negotiating a deal.
The Globe and Mail is not identifying the person because they were not authorized to speak publicly about the exchanges.
“We have reiterated several times over the past few months that we intend to be friendly and persistent in pursuing a transaction,” Couche-Tard chief executive Alex Miller told analysts on the company’s third-quarter earnings call Wednesday. “We look forward to fulsome engagement with Seven & i so that we can reach definitive terms and move forward.”
Couche-Tard is working with Seven & i on a marketing package for assets that might need to be divested, Mr. Miller confirmed. He said non-disclosure agreements are being signed by potential buyers as part of that process but that Couche-Tard has not signed a non-disclosure agreement with Seven & i.
Couche-Tard investors are beginning to voice their impatience with the Seven & i takeover effort, which is now into its seventh month with little obvious headway made. Some have expressed their view that the company will need to move on at some point over the next several months if a deal doesn’t materialize.
The Canadian company hasn’t pulled back on weighing other merger and acquisition opportunities, even as it remains focused on a Seven & i agreement, Mr. Miller said. He said the company continues to “stay engaged” on several larger potential transactions in Europe and that deal flow for targets of all sizes remains “pretty heavy” in the United States as well.
“Today, we cannot discard any file,” Couche-Tard chief financial officer Filipe Da Silva said on the call. “We are completely engaged on the Seven & i conversation, but we don’t know what will be the conclusion of this process. And so our duty is to make sure that we explore any file that comes to our table.”
Merging 7-Eleven stores with Couche-Tard’s Circle K outlets would see the combined company control more than 100,000 stores globally and roughly 20,000 in the United States, more than 7.6 times the number of nearest competitor Casey’s. The U.S. Federal Trade Commission (FTC) would likely require the sale of about 2,000 stores to allow a deal, analysts have estimated.
Couche-Tard executives have said there is a “path to regulatory approval” in the United States. But Seven & i CEO Stephen Dacus expressed doubts about that claim, telling The Yomiuri Shimbun newspaper on the weekend that Couche-Tard has provided no clear solutions so far.
“They just kept saying ‘Trust us. We can do this. We’ll work it out,’” Mr. Dacus was quoted as saying. He noted that although Couche-Tard has experience in winning antitrust approval for previous takeovers, many of those have been small deals and nothing on the scale of this potential tie-up. The FTC will be “much stricter” in this case, he said.
Developments on Couche-Tard’s takeover effort came Wednesday after the company reported a net profit of US$645-million or 68 US cents per share for the latest quarter on revenue of US$20.9-billion. That bested analyst consensus estimates of 66 US cents per share.
It marked the first time over the past six quarters that profit per share has increased year-over-year, according to Stifel research analyst Martin Landry. Same-store merchandise sales fell by 0.1 per cent in the United States, while increasing by 2.8 per cent in Canada and by 0.2 per cent in Europe and other regions, Couche-Tard reported.
“We continue to see the consumer under pressure, perhaps specifically in the United States but really everywhere in our geographies,” Mr. Miller said. He said the company has reduced the number of items it offers in stores and will focus on meal bundles and new nicotine initiatives among different ways to stoke sales.