The $58 billion Slurpee acquisition

Most of the bigger mergers and acquisitions stories that have made headlines over the last few years have been tech related, such as Nvidia attempting to acquire Arm Holdings, Big Tech companies “acquihiring” AI startups’ teams, or Adobe attempting to acquire Figma.

Occasionally, however, we get news of a potential blockbuster deal in the least-tech-focused of industries, like grocery stores, or, as of Wednesday… gas stations. Earlier this week, Reuters reported that Junro Ito, a member of the founding family of Japan’s Seven & i Holdings, the parent organization of 7-Eleven, had made an eye-watering $58 billion bid to take the company private. The reason? They’re trying to outbid Couche-Tard, the Canadian convenience-store operator and owner of Circle K.

Interestingly, this story comes the same day that the Financial Times reported that Seven & i and Couche-Tard had “begun negotiations” over a $47 billion takeover bid for the 7-Eleven store owner. The Financial Times piece also noted that any bid from Ito would likely require “unprecedented levels of borrowing” from Japan’s banks to finance the deal.

A few things here:

First, $58 billion would be, by far, the largest management buyout in history if the deal closed. For context, Hilton Worldwide, one of the world’s largest hotel chains, is worth $62 billion. The largest management buyout on record was in 2006, when the founder of US hospital chain HCA worked with KKR and Bain Capital to acquire the company for $32.9 billion. The largest leveraged buyout of any kind was the $45 billion acquisition of Texas-based energy company TXU by KKR, TPG, and Goldman Sachs in 2007, and it ended in bankruptcy when the company failed to make interest payments during the recession. Even the lower bid from Couche-Tard would break records.

Second: $58 billion?! For 7-Eleven? I had no idea this company was that big, but Seven & i owns more than 85,000 stores across several brands, including 7-Eleven, Speedway, Japanese supermarket Ito-Yokado, Japanese ATM and online banking solution Seven Bank, Japan’s Denny’s franchises, and more. In total, the conglomerate generated $73.5 billion in 2023 revenue, adjusted for current exchange rates. Meanwhile, Couche-Tard, which owns Circle K, operates ~16,800 stores around the world, and its 2023 revenue was in line with its Japanese counterpart at $71.9 billion. So, to be fair, 7-Eleven is more than just a gas station.

My question, however, is whether or not the “white knight” bid from Junro Ito is real, or if the founding family is seeing just how high Couche-Tard is willing to go.

Alain Bouchard, Couche-Tard’s founder and executive chairman, has been gunning for 7-Eleven for decades. Bouchard first tried to acquire the company’s US business in 2005, but Seven & i declined. Nineteen years later, they could make history, creating a conglomerate with more than 100,000 stores worldwide (pending any regulator-mandated divestitures), and this move would give Couche-Tard a large footprint in Asia, where it only has 1% market share right now.

The question, however, is finding the right price.

There’s a scene in the final season of HBO’s “Succession” where Logan Roy is in a bidding war with his kids to acquire a competing media company. After he discovers that they beat him out by offering $10 billion, he calls them to say one of the best lines in TV history: “Congrats on saying the biggest number, you f---ing morons.”

I wouldn’t be totally surprised if there’s a similar game of chicken happening with these convenience-store chains right now. In August, Couche-Tard made an initial $38 billion offer for Seven & i, sending the latter’s stock price up 23% in response to the news. A month later, Seven & i rejected the offer, and Couche-Tard countered with a new $47 billion bid. While the Ito family could be willing to pay a $10 billion premium over Couche-Tard’s latest offer to retain control, they might also be willing to see if they can get the Canadian conglomerate to “say the biggest number” and pay a $20 billion premium over its initial bid.