Couche-Tard sets his sights on Slurpee King
Since I grew up near Winnipeg, the Slurpee capital of the worldI assumed I knew every part the 7-Eleven universe had to supply. Then I visited Japan and Thailand last yr. I noticed I hadn’t seen anything yet. (All figures on this section are in US dollars.)
In much of Thailand and Japan (and other parts of Asia as well), the convenience store is a day by day stop. Tokyo has over 3,000 7-Eleven stores, a majority of the country’s 56,000-plus convenience stores. While 7-Eleven was a vital a part of my childhood, it pales compared to the role it plays in lots of Asian communities.
That’s why it immediately caught my attention when Canadian corporate darling Alimentation Couche-Tard (ATD/TSX) announced It was a friendly takeover offer for Tokyo-based Seven & I Holdings Co (SVNDY/NIKKEI). The potential deal is historic for a lot of reasons.
- The takeover of Seven & I Holdings Co is the biggest takeover goal ever pursued by Japan from a foreign buyer.
- It is the primary test of the Japanese Ministry of Economy, Trade and Industry’s (METI) recent takeover rules from 2023, that are intended to make foreign takeovers more attractive and Japanese firms more internationally competitive.
- It would probably Enbridge’s 28 billion US dollars The acquisition of Spectra Energy Corp. in 2016 was Canada’s largest corporate acquisition in history.
- This would mix Couche-Tarde’s convenience store empire of 16,700 stores in 31 countries with 7-Eleven’s 85,800 stores in 19 countries.
- By combining ATD and 7-Eleven’s U.S. market shares, Couche-Tard would control greater than 12 percent of the U.S. convenience store market. Its closest competitor could be Casey’s General Stores, with just 1.7 percent.
- This is a large chunk for ATD, which is currently valued at around $56 billion, as 7-Eleven is currently valued at around $38 billion.
- The potential acquisition is so large that many analysts consider ATD would want to lift $18 billion in recent equity to finish the deal. That could be by far the biggest equity offering in Canada. That could be along with the $2 billion in money that ATD has and the flexibility to borrow about $20 billion. There are speculation that Canadian pension plans could be a vital source of capital for the conclusion of an agreement.
Neither company disclosed the precise terms of the deal, but Couche-Tard described the offer as “friendly and non-binding,” a key difference from a “hostile takeover.” (A hostile takeover occurs when an organization attempts to purchase greater than half of one other company’s shares on the open market against the needs of the goal company’s management, thereby gaining operational control.)
This move will not be completely out of the blue for ATD, as the corporate has made major acquisitions before. The Quebec-based company has a protracted history of successfully integrating recent acquisitions. Its attempt three years ago to purchase French grocery chain Carrefour for $25 billion was thwarted on the last minute by the French finance minister on the grounds of food safety. Similar protectionist instincts on the a part of the federal government could prevent this huge deal from happening.
However, Couche-Tard has been circling 7-Eleven for over two years now (Circle K?), and maybe the corporate believes it has what it takes to navigate the brand new waters of Japanese corporate law and shut the deal.
While some 7-Eleven customers will likely be nervous (no person desires to see change at their favorite corner store), Seven & I Holdings shareholders ought to be pleased. Shares rose 22% after the planned acquisition was announced.
Stock markets 1900 vs. 2023
It’s at all times price keeping the long-term outlook in mind when fascinated about trends and market forces. Given the incredible run the U.S. stock market has had lately, it is vital to do not forget that this outperformance is unlikely to last without end.
