Alimentation Couche-Tard and Seven & i expect concrete negotiations with private equity firms to start within weeks on the carve-out of thousands of stores in the US, in a pivotal moment for the Canadian group’s $47bn takeover attempt of the 7-Eleven owner.
The Japanese group has said it needs firm assurances on how any deal would pass the scrutiny of US regulators before it agrees to more substantive talks. ACT owns the Circle K brand and, combined, the two groups would comfortably hold the number one position in the fragmented US convenience store market.
While communicating it is co-operating in shareholders’ best interests, Seven & i has consistently rebuffed ACT’s approaches and questioned the deal valuation, while trying to demonstrate it can generate more value as a standalone group. It has unveiled a raft of restructuring measures, including the listing of its key North American business, a $13bn buyback and the appointment of its first foreign chief executive, Stephen Dacus.
However, Seven & i’s share price has yet to respond significantly to the moves, said analysts, and has fallen 10 per cent so far this year, with the failure of a rival buyout plan by the company’s founding family denting investor confidence last month.
The two groups recently began a broad search for a buyer of close to 2,000 of around 20,000 US stores they would own if combined. They believe the sale will be needed to satisfy competition regulators and have sent confidential memos to private equity groups, according to people familiar with the matter. Two of the people said expressions of interest were expected by the end of the month, and one person added that ACT would take the lead on some of the more sensitive points of negotiation.
ACT declined to comment. Seven & i said it was continuing to engage constructively with ACT on antitrust regulatory issues and it was true that non-disclosure agreements with potential store buyers had been signed.
Dacus’s appointment has been controversial with some investors, such as US-based Artisan Partners, who have railed against the fact he has also been head of the special committee given the job of adjudicating on the ACT bid. Seven & i will hold its annual meeting in May, where his elevation will need to be confirmed.
Once potential buyers have been identified the process will move on to more complicated structural issues, including who would operate the standalone business and how supply chains might be constructed, said the people.
The process of creating a viable business from the patchwork of stores from both groups is seen as difficult but do-able and a full deal could be achieved in as little as three months, they said. The process could be accelerated if ACT or a private equity group had an operating team ready to go. In a best-case scenario, said one of the people, a deal could clear antitrust in a year.
One Seven & i investor said they were agnostic to the outcome of the takeover attempt, as a deal with ACT would crystallise a quick return, whereas the Dacus restructuring plan would represent “short-term pain for long-term gain” likely above any price that the Canadian group could afford. Another investor said it was now a “show-me story”, as the group had to prove it could deliver on its promises.
The planned IPO of Seven & i’s North American business — in which the Japanese group plans to keep a majority position and ACT has said it would not participate — is slated for the second half of 2026.
Narrowing the divestment of the stores to a single buyer is seen as an important milestone because some investors believe Seven & i will then face a crucial decision that could see it forge ahead with the process and greenlight deeper talks with its suitor. ACT has also indicated it may be able to improve its offer if given access to more financial information.
Others, however, are sceptical the board will ultimately agree to progress talks on being acquired by the Canadian group and people familiar with the matter have warned that this is not a binary choice for Seven & i, particularly as boards in Japan are guided by wider considerations than price alone.
The process of defining which stores would need to be sold has been going on for months, with the two sides going back and forth on how competition concerns can and should be addressed and the size of potential break fees, which would be paid by ACT in the event the deal foundered.
Late last year, term sheets were exchanged but the two groups differed on the nature of antitrust remedies that would be needed and the break-up fee was well below the roughly 5 per cent of deal size considered adequate by Seven & i, said people familiar with the matter.
