Antitrust Considerations Loom Over Circle K’s Purchase of 7-Eleven

Canada’s Alimentation Couche-Tard, owner of Circle K convenience stores, has said that it wants to acquire all remaining shares of Seven & I Holdings, which runs 7-Eleven internationally. The question is what regulators in multiple countries might make of it and how that could impact any potential deal and net lease property owners in the U.S.

Couche-Tard has been on an acquisition spree. The company announced on Monday that it had submitted a “friendly, non-binding proposal” to Seven & I to reach a “mutually agreeable transaction that benefits both companies’ customers, employees, franchisees and shareholders.” It also reached a definitive deal to acquire the approximately 270 retail and fueling U.S. GetGo Café +Markets from supermarket retailer Giant Eagle.

But there’s nothing definite about a deal between Couche-Tard and Seven & I Holdings just yet. Seven & I has approximately 85,000 stores — including 7-Eleven stores and Speedway gas stations in the U.S. in 19 countries and regions reaching about 59.9 million people daily, according to company filings. Couche-Tard claims a total network of 16,740 locations.

Such an acquisition would result in an excess of 100,000 stores — quite a number for regulators to consider. The U.S. portion would account for approximately 20% of the convenience stores in the country.

According to CNN, the government of Japan recently made it more difficult for companies to ignore unsolicited M&A offers to boost foreign investment. However, Neil Saunders, managing director of GlobalData, told CNN that “most Japanese firms are very cautious and resistant to change” and buying a Japanese firm is complex. Unless agreed upon and then approved by regulators, there will likely be no deal. According to the Financial Times, it’s likely to draw scrutiny under the Foreign Exchange and Foreign Trade Act as it would be the largest takeover of a Japanese company by a foreign firm.

Just as important could be a U.S. antitrust review, which is almost guaranteed, according to the FT’s sources. It’s likely to be treated on the same level as the $24.6bn deal between Kroger and Albertsons. Seven & I has about 12,500 convenience stores in the U.S. and Couche-Tard has more than 7,000. The nearly 20,000 stores would be 10 times larger than the nearest competitor, Casey’s.

Antitrust regulation has been focused and tough under the Biden administration, although there is no telling what might happen after the presidential election. A deal acceptable by regulators would likely involve the sale of between 750 and 1,000 stores, according to analysts at two funds who spoke with the FT.