Alimentation Couche-Tard says it's "disappointed" with the "very limited" engagement it alleges it’s received from 7-Eleven’s parent company since it made a play for the Japanese business last year.
Laval, Que.-based convenience store giant Couche-Tard called for "full engagement" late Monday from Seven & i Holdings Co. Ltd. as the companies explore a possible union.
"We have reiterated several times over the past few months that we intend to be friendly and persistent in pursuing a transaction, which we believe is in the best interest of all stakeholders," Couche-Tard said in a lengthy statement.
"We have done that in the face of significant frustration and distraction."
Asked about the statement, Seven & i referred The Canadian Press to a letter released Sunday that said a special committee convened to assess a potential deal "continues to engage constructively with (Couche-Tard) and has not recommended to reject any third-party proposal."
"However, it has taken some time to get to that constructive engagement," the Seven & i statement said.
Couche-Tard's apparent irritation at the situation comes as its executives are visiting Japan this week to try to advance its proposal.
Seven & i had been rebuffing Couche-Tard's overtures since a bid materialized last summer, but the Japanese company has appeared to warm to the possibility of a tie-up now that the firm's founding family backed out of making a potential bid over difficulties securing financing.
The companies have been at loggerheads over how difficult it may be to satisfy antitrust regulators who will have concerns about the amount of competition the deal could stifle in the U.S.
Couche-Tard said Monday that even after it fulfilled Seven & i’s request for a revised, yen-based bid in January, its takeover target has "focused only on the path to U.S. regulatory approval."
Seven & i said in its Sunday letter that any sale to Couche-Tard would face “significant” antitrust hurdles because the companies have at least 2,000 overlapping stores that would likely have to be divested to a viable, credible and independent buyer to satisfy regulators’ competition concerns.
Seven & i said Couche-Tard wanted the two sides to sign an acquisition agreement and then spin out overlapping stores or try to find a buyer, but the 7-Eleven owner felt that approach would have come with too high a chance of the deal not closing and keep it in limbo for years.
"This is not the view of Couche-Tard, or our regulatory counsel," Couche-Tard said Monday.
It argues there is a "clear path" to landing regulatory approvals because the U.S. convenience store market is "highly fragmented," with over 150,000 stores. Couche-Tard and Seven & i have stores blanketing the market, but the Canadian firm said there's also a "wide array of brick and mortar and online food and merchandise providers" fuelling competition.
Couche-Tard said it outlined how the companies could receive approvals in a detailed proposal it made to Seven & i in December. The proposal included commitments to divest some stores and a large reverse termination fee to ensure Couche-Tard would be "highly motivated" to complete the transaction.
The transaction would be funded by both debt and equity.
It followed up the proposal with the January bid made at Seven & i's request to confirm Couche-Tard's "continued interest."
The companies have since agreed to work together to map out potential buyers for convenience stores that could be sold to satisfy U.S. antitrust regulators.
The divestment exploration was one of three options Couche-Tard's special committee put forward to advance talks. Another option asked the Canadian firm to sell all its U.S. Circle K locations and a third suggested Seven & i would agree to a merger only if Couche-Tard signs a divestiture deal with a potential buyer.
"We look forward to working with the regulatory authorities to reach alignment on an appropriate divestiture package," Couche-Tard said.
Despite efforts to work together, Desjardins analyst Chris Li said he pegs the likelihood of a deal coming to fruition "at the lower end."
"We believe success in finding credible buyers for the divested business would increase the likelihood of (Couche-Tard) acquiring Seven & i," he said in a note to investors. "However, it is possible that there could be other hurdles given the size and nature of this transaction."
Meanwhile, RBC Capital Markets analyst Irene Nattel pointed out Couche-Tard's latest statement doesn't offer a timeline for a potential deal but pointed out "at some point (Couche-Tard) will need to make a decision on whether to walk away" and consider alternative mergers and acquisitions.
The divestiture exploration comes as Seven & i begins to chart a new future. Last week, it revealed it intends to pursue an initial public offering of shares in its North American 7-Eleven business by the end of 2026.
It also said it would sell some non-convenience store assets, including supermarkets and other retail stores, to Bain Capital for US$5.4 billion and appointed Seven & i's board chairman, Stephen Dacus, as its new president and CEO. Dacus is the former head of Walmart in Japan and will be the first non-Japanese CEO to helm Seven & i.
The market as well as U.S.-based investor Artisan Partners did not respond well to the plan. Artisan urged Seven & i to seriously consider Couche-Tard's takeover offer.
This report by The Canadian Press was first published March 11, 2025.
Companies in this story: (TSX: ATD)
Tara Deschamps, The Canadian Press
