Couche-Tard considers debt financing to acquire Seven & i, aiming for the largest-ever Japanese takeover
Alimentation Couche-Tard Inc. is planning to issue debt and seek funding from its pension shareholders to finance a potential acquisition of Seven & i Holdings Co., the owner of 7-Eleven.
According to sources familiar with the situation, this move comes as part of a broader strategy to buy out the Japanese company, as reported by Financial Post.
The proposed acquisition is considered viable due to Seven & i's strong cash flow, which is expected to help Couche-Tard pay down the resulting debt quickly.
In its most recent fiscal year, Seven & i generated ¥335.6bn (US$2.4bn) in cash, nearly double the global average for similar companies, according to Bloomberg data.
Couche-Tard, which operates 16,700 stores and is valued at around US$55.5bn, is interested in acquiring the entire Seven & i operation. With a market value of approximately US$38bn, the deal would represent the largest-ever foreign takeover of a Japanese company.
Last week, both companies confirmed that Couche-Tard had submitted a preliminary, non-binding proposal to purchase Seven & i.
Seven & i's response to the proposal remains undecided, with a special committee of independent outside directors currently reviewing the offer. The company has not provided a timeline or details on how it plans to proceed. Meanwhile, representatives for Couche-Tard were unavailable for comment.
The acquisition approach by Couche-Tard is seen as a significant test of recent changes in Japan’s merger and acquisition guidelines. It raises questions about whether corporate Japan is prepared for such a large-scale foreign takeover.
Couche-Tard plans to retain local leadership and invest in the business, should the acquisition proceed.
Regarding potential regulatory hurdles, the two companies operate in highly fragmented markets, and their businesses are considered complementary.
Couche-Tard has a history of making divestments to satisfy regulators, having done so in 2017 during its acquisition of CST Brands Inc., and again in 2022 in a proposed deal to buy Wilsons gas stations in Canada.
Seven & i has faced pressure from investors to boost its value, with activist fund ValueAct Capital Management LP suggesting last year that the company should focus more on its 7-Eleven stores.
This week, Artisan Partners, another investor, urged Seven & i to negotiate with Couche-Tard, asserting that the Canadian retailer “sees exactly what we see — an undervalued, mismanaged, world-class asset.”
