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In August, Canadian c-store giant Alimentation Couche-Tard made a friendly proposal to 7-Eleven parent company 7 & i Holdings (7&i) to acquire the legendary convenience brand. While talks are still in very preliminary stages, the result would leave Couche-Tard with more than 100,000 sites around the world, spanning across the Asia-Pacific, North America, Australia and Europe.
“Couche-Tard has deep respect for 7&i and the business it has built in Japan and around the world, including its operating model, franchisee network and brand,” Couche-Tard noted in its latest statement. “We continue to have strong conviction that a combination with 7&i has clear strategic and financial benefits for both companies’ customers, employees, franchisees and shareholders. We believe that, working together, we can successfully reach and complete a mutually agreeable transaction.”
This statement comes following the news that 7&i had rejected Couche-Tard’s initial $39 billion preliminary offer, claiming that the proposal “grossly undervalues (the) company’s intrinsic value and opportunities to unlock that value,” according to a release from 7&i.
However, the Japanese company remains “open to sincerely consider any proposal that is in the best interests of our shareholders and other stakeholders.”
With 7&i open to follow up offers, Couche-Tard remains committed to working with the company.
“Given the mutual benefits of a combination, we are disappointed in 7&i’s refusal to engage in friendly discussions,” Couche-Tard’s statement read. “We are highly confident that collaborative discussions would lead to our ability to find increased value for 7&i shareholders.”
Now, according to Reuters, the Federal Trade Commission (FTC) has taken notice of the deal, stating that it may probe a potential transaction between the companies. Reuters coined this as “an early sign that a merger could face regulatory scrutiny.”
What It Means For The Industry
To learn more about the implications of the potential deal, CStore Decisions sat down with Art Sebastian, CEO of NexChapter, an advisory firm that specializes in the c-store industry.
According to Sebastian, the deal comes at an opportune time for larger chains.
“When you look at what’s required to win, we’re sort of in this period of time where retailers are looking for scale,” he said. “Both of those companies have pretty good scale as it is, which I think is what makes this an even more interesting topic.”
As companies like 7-Eleven and Couche-Tard continue to scale, there then arises a question of competition. Sebastian, who spent most of his career working on the retail side of the industry, has a unique perspective on the idea. The main headline, though — focus on what you are doing.
“Having been a retailer for the majority of my 30 years working, I think a retailer should remain focused on their customer and their value prop,” he said. “There is so much to get distracted by and so many things you can pay attention to, but first and foremost, worry about your business.”
That is Sebastian’s point of view as a former retailer. Now, from an outside perspective, he is a bit more inquisitive. Sebastian pointed back to the issue of scale — larger companies have more resources, more market density and the potential for lower prices. But, there are always ways to compete.
Sebastian noted that one way retailers can up their game is through alternative revenue sources, such as retail media or mobile programs. Research continues to show that a seamless mobile app and loyalty program can play a key part in achieving repeat customers.
What retailers mainly need to do, according to Sebastian, is just focus on what they are doing well. There will always be competition in the c-store industry, so the opponent shouldn’t determine how you operate your business.
He is, however, excited about the potential deal from an outsider’s perspective — these are two highly innovative chains making incredible strides in the industry. Both have leaned into the highly-lucrative private label market, invested in delivery and e-commerce, in-store technology and so much more.
“When you combine these companies, you tend to have a lot of internal best practice sharing, which, when you mix it all together, would really be something to watch,” he continued.
Sebastian concluded with the idea that the c-store industry is already facing giant competitors coming in the forms of quick-service restaurants (QSRs) and grocery stores. With the line between these industries being blurred more and more every day, there are simply more important things to worry about for the independent operator.
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