(Bloomberg) — Alimentation Couche-Tard Inc. could take on debt and tap funds from its pension shareholders to finance a planned buyout of 7-Eleven owner Seven & i Holdings Co., people familiar with the Canadian retailer’s thinking said.
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A takeover of the Japanese company with debt would be possible because of its strong cash flow, which would help it pay off debt quickly, said the people, who asked not to be identified because the information is not public. Couche-Tard is interested in Seven & i as a whole, they added.
The companies said last week that Couche-Tard had made a preliminary, non-binding offer to acquire Seven & i, which operates over 85,000 stores worldwide. Any deal to acquire the retailer, which has a market value of about 5.3 trillion yen ($36.8 billion), would be the largest ever foreign takeover of a Japanese company. Couche-Tard, which operates 16,700 stores, is worth about $55.5 billion.
Representatives for Couche-Tard did not immediately respond to emailed requests for comment. A representative for Seven & i did not immediately respond to a request for comment.
Takeovers of Japanese companies by foreign firms are extremely rare. Couche-Tard’s move is seen as a test of recent changes to the guidelines for merger and acquisition proposals and a test of whether the Japanese economy is ready for a large-scale takeover of a well-known company.
Couche-Tard wants to keep the leadership in place and intends to invest in the company, the people said.
As for any regulatory questions from competition authorities, the two companies are complementary and operate in highly fragmented markets, according to people familiar with the matter.
Couche-Tard has a history of divesting to satisfy regulators: in 2017, the company agreed to divest gas stations as part of its deal to acquire CST Brands Inc., and in 2022, the company agreed to sell assets as part of a planned deal to acquire Wilsons gas stations in Canada.
Seven & i has appointed a special committee of independent outside directors to review the proposal. Terms have not been made public. The company has given no indication of when or how it intends to respond.
Seven & i is under pressure from investors to increase its value. Activist fund ValueAct Capital Management LP claimed last year that its assets could be worth more and that it should focus on 7-Eleven stores. This week, Artisan Partners, a Seven & i investor, waded into the fray, urging the Japanese company to negotiate with Couche-Tard.
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