Fueling Up is a column from C-Store Dive offering a fresh perspective on the top news and trends in the convenience store industry.
The hype surrounding what would’ve been one of the most monumental c-store mergers in history died last week when Alimentation Couche-Tard withdrew its nearly $50 billion buyout offer of Seven & i Holdings.
Nearly a year after it made its bid, Circle K’s parent company said a lack of engagement from Seven & i was a major roadblock to the deal, which would’ve included over 80,000 7-Eleven c-stores globally.
To say the Canadian retailer is bitter about this ending would be an understatement. In a letter to Seven & i late Wednesday evening, Couche-Tard’s President and CEO Alex Miller and Chairman of the Board Alain Bouchard said Seven & i’s due diligence over the past year was negligible. The executives added that Seven & i displayed a “persistent lack of good faith and judgement” during the process and “engaged in a calculated campaign of obfuscation and delay.”
But this apparent negligence is nothing but a “mischaracterization,” according to Seven & i, which released its own letter Thursday morning in response to Miller’s and Bouchard’s onslaught. The Japanese company said it’s disappointed but not surprised by Couche-Tard’s withdrawal, adding that Couche-Tard faced significant challenges in economic and financial markets over the past year.
Despite Couche-Tard’s accusations of a premeditated rejection, Seven & i emphasized that it “consistently engaged in good faith and constructively” in exploring a deal with Couche-Tard.
This is obviously contradictory. Couche-Tard said Seven & i wasn’t willing to play ball, while Seven & i claims it was suited up and ready to swing at the right pitch. Who and what are we supposed to believe?
All we can do is break down the facts.
Pressure buildups and cultural dissonance
Seven & i had been under shareholder pressure long before Couche-Tard entered the picture. Investors have been urging the company to spin off its c-store business into a separate entity for years. That pressure intensified as Seven & i’s earnings dropped in the years following, reaching a climax when more investors called for the removal of several directors as well as former CEO Ryuichi Isaka.
When Couche-Tard came along, some shareholders were adamant that Seven & i pursue the deal to boost its corporate value.
So even if Seven & i was never interested in selling to Couche-Tard and yielding its claim as the world’s largest c-store retailer, passively engaging with the Canadian company may have been in its best interest.
“The blunt truth is that Seven & i was never really in the market for a deal. It saw the overtures as hostile and contrary to its interests,” Neil Saunders, managing director of retail research agency GlobalData Retail, said in a LinkedIn post on Thursday. “However, there were a string of other reservations that the group raised, all designed to delay and reduce the possibility of an agreement. This attrition eventually wore Couche-Tard down.”
Even if Seven & i was legitimately interested in being acquired, a difference in cultures may have also halted progress. This was top of mind from the start, with Couche-Tard saying back in September that although it had no presence in Japan, it would do its best to empower Seven & i’s leaders and operators in the nation to carry on as usual.
But the “very different working styles” between Japan and Canada may have ultimately been too much for Seven & i, Jarred Neubronner, senior analyst with the Institute for Grocery Distribution, said in a LinkedIn post on Thursday.
“After having built up 7-Eleven in the past decades to become the world’s largest convenient brand, Seven & i‘s management would not have wanted a takeover that would lead to a drastic change in ways of working,” Neubronner said.
“The blunt truth is that Seven & i was never really in the market for a deal. It saw the overtures as hostile and contrary to its interests."
Neil Saunders
Managing director of GlobalData Retail
Despite the sour ending to what was the most anticipated storyline I’ve covered as a c-store journalist, not all may be lost.
When I posted the news to LinkedIn on Thursday, Michael Infranco, assistant vice president of retail analytics firm RetailStat, commented that given Seven & i’s IPO plans for 7-Eleven, a deal for the thousands of North America stores could still be on the table.
Whether that happens remains to be seen. I won’t count on it. But c-store operators have proven that even in an industry this reliable and consistent, they’ll throw a nasty changeup every once in a while.
