7-Eleven and Circle K Owners Agree to Discuss Possible Merger

The owners of the 7-Eleven and Circle K convenience chains say it’s time to talk.

Alimentation Couche-Tard, which owns Circle K, announced last week that it had signed a non-disclosure agreement with 7-Eleven’s Japanese parent Seven & i, a company it has hoped to acquire since last year.

The agreement allows the parties to “progress transaction discussions, facilitate due diligence, and collaborate on plans to engage with regulators,” Couche-Tard said in a news release.

“There can be no assurance that these discussions will result in a transaction,” the release added.

Last August, Canada-based Couche-Tard proposed a $39 billion acquisition offer for Seven & i, leading the Tokyo-based company to form a special committee of independent directors to examine the bid.

That committee later determined the offer was not sufficient, saying it undervalued their business. Couche-Tard upped its offer in October to $47.2 billion, signaling its commitment to the deal.

“We appreciate the special committee of Seven & i engaging in substantive discussions regarding our proposal and providing access to diligence,” Couche-Tard President and CEO Alex Miller said in last week’s news release.

“We look forward to working collaboratively with Seven & i in the interests of all stakeholders.”

In a message to its shareholders last week, Seven & i said it had “made significant progress on our engagement with Alimentation Couche-Tard.”

Last year, the U.S. Federal Trade Commission (FTC) said it would investigate the proposed acquisition due to antitrust concerns.

Assuming the deal goes forward, it would be the largest ever acquisition of a Japanese company by a foreign buyer. But aside from possible regulatory hurdles in the U.S., the takeover proposal is also expected to see some scrutiny in Japan as well. A pair of two mergers and acquisitions lawyers told Reuters last year that the transaction could come under review under Japan’s Foreign Exchange and Foreign Trade Act.

The deal is happening at a time when convenience stores are seeing consumers pull back a bit from purchasing snacks, as covered here in March.

“People can’t afford it anymore,” David Guerino, sales rep for a Chicago-area Circle K store, told the Wall Street Journal. “If it’s not a necessity, they’re not as willing to splurge.”