LAVAL, QC, March 10, 2025 /PRNewswire/ - Alimentation Couche-Tard Inc. ("Couche-Tard" or the "Corporation") (TSX: ATD), a global leader in convenience and mobility, today issued the following statement regarding its proposal to acquire Seven & i Holdings., Ltd. ("7&i").
Alimentation Couche-Tard inc. Logo (CNW Group/Alimentation Couche-Tard Inc.)
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. For many years, we have firmly believed that there is a unique strategic fit between Couche-Tard and 7&i, and that we can achieve significantly more together than each of our companies can achieve individually, including accelerating the global growth of the iconic 7-Eleven brand and strengthening the 7&i business in many parts of the world. We also firmly believe that a combination provides an opportunity for shareholders and stakeholders of both companies to realize significant value.
In our most recent efforts to engage with 7&i with respect to a potential transaction, we have spent over six months attempting to enter fulsome, constructive, friendly discussions to reach a mutually agreeable transaction and have conscientiously worked to address the questions on our proposal posed to us by 7&i. We remain focused on entering into these more fulsome discussions, and continue to be disappointed that engagement has been very limited, and focused only on the path to U.S. regulatory approval.
In light of the various announcements, letters and commentary by the Board of Directors and management of 7&i in the last week, we believe it is in the best interest of all stakeholders to provide a comprehensive and transparent update on the proposal we have made to 7&i and the current status of discussions.
Update on Couche-Tard's non-binding proposal
On January 24, 2025, we submitted a revised, yen-denominated, non-binding proposal at 7&i's request to confirm our continued interest in 7&i1. As noted in our proposals, access to fulsome diligence information could provide an opportunity for us to enhance our proposal.
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1 We anticipate at this moment that the commencement of our proposed transaction will be subject to customary conditions including the following: (i) the approval of the Board of Directors and Special Committee of 7&I, (ii) obtaining the necessary regulatory clearances and approvals in a manner acceptable to Couche-Tard (including without limitation antitrust clearances and clearances under the Foreign Exchange and Foreign Trade Act of Japan and other applicable foreign direct investment regulations), (iii) completion of due diligence reasonably satisfactory to Couche-Tard, (iv) entering into with 7&i definitive agreement(s) for the proposed transaction, (v) securing committed financing for the entire purchase price, (vi) there being no events or circumstances constituting or likely to give rise to a material adverse effect on 7&I or general economic or market conditions, and (vii) Couche-Tard not being aware of any facts or circumstances that are likely to constitute (a) unpublicized material facts with respect to 7&i (as defined in Article 166, Paragraph 2, of the Financial Instruments and Exchange Act) or (b) unpublicized facts concerning a tender offer, etc. (as defined in Article 167, Paragraph 3, of the Financial Instruments and Exchange Act) with respect to shares of 7&i.
We believe our proposal presents shareholders with a clear economic value, which stands in marked contrast to 7&i's repeatedly revised plan as announced last week. The new multi-year plan relies on a future U.S. IPO, a long-dated capital return plan, and a turnaround in performance of its convenience stores – all of which come with material uncertainty with respect to delivering value to shareholders.
Representatives of 7&i also asked us for additional clarity as to our intentions for financing the proposal. At the time we enter into a definitive agreement, we would plan to have fully committed financing for the entire purchase price in place. We plan to fund the transaction with a combination of debt and equity, sized with intention to retain strong investment grade credit ratings as we have done with numerous acquisitions in the past. The responsible level of leverage that we would have across the business would allow us the operational and financial flexibility to continue to invest in both the 7&i and Couche-Tard businesses. At present, we have no concerns with our ability to fully finance the transaction. Goldman Sachs, Royal Bank of Canada, and Scotiabank have also provided highly confident letters in support of our financing.
Approach to U.S. regulatory approval process
Couche-Tard has a successful track record of working with U.S. and other regulators, in full compliance with applicable processes and requirements, to secure approvals of transactions.
We firmly believe there is a clear path to regulatory approval in the U.S. The U.S. convenience store market is highly fragmented, with over 150,000 stores nationally. Both Couche-Tard's and 7&i's stores operate in the U.S. in competition with a wide array of brick and mortar and online food and merchandise providers. Additionally, 7&i and Couche-Tard largely operate in complementary markets across the U.S.
7&i representatives have raised numerous times the U.S. regulatory approval process as a "threshold" question for them. On December 27, 2024, contrary to assertions from 7&i, we shared a detailed proposal with 7&i outlining with specificity the firm commitments we would be willing to make with respect to U.S. regulatory approvals. These included, 1) a robust commitment on a specific base number of stores we would be willing to divest, and 2) a large reverse termination fee, structured to ensure Couche-Tard would be highly motivated to take additional actions as may be necessary in order to complete the transaction. This proposal was informed by significant analysis on our side with significant input from 7&i management and its legal representatives.
We were also very clear at that time that we were ready to immediately begin collaborative work to align on a portfolio of stores to be divested and to prepare to market that portfolio to potential buyers.
On February 5, 2025, 7&i finally agreed to take this next step. However, 7&i also insisted on us soliciting interest from potential partners ahead of full engagement, including due diligence and discussion of other transaction terms. In the spirit of being constructive, we agreed to do so despite this being an unusual process request, and the incremental time this would add to our discussions. Over a month later, we have only now received 7&i's consent to reach out to potential buyers of the stores to be divested.
The divested business would be a leading operator in the U.S., with national scale and exposure to attractive markets. Couche-Tard would be committed to standing up the business with the infrastructure and leadership required to create a great business. We firmly believe that the divested business will be a strong and extremely viable competitor in the U.S. and will attract interest from credible buyers.
The 7&i Directors' letter to shareholders on March 10, 2025 goes into great detail about 7&i's perspective on the process for obtaining U.S. regulatory approval – we would note this is not the view of Couche-Tard, or our regulatory counsel, and we look forward to working with the regulatory authorities to reach alignment on an appropriate divestiture package.
Plans to preserve and enhance operations in Japan
A combination with 7&i creates a global convenience champion with over 100,000 locations around the world. We see incredible potential in combining that global scale with local excellence. We believe that the sharing of best practices, combined power of innovation, and a scaled global supply chain has the potential to deliver significant value to customers, franchisees and employees.
We have tremendous respect for the Japanese operations of 7&i and consider the 7-Eleven convenience operations in Japan to be world-leading. We are committed to maintaining the quality, value and service levels of 7-Eleven there. We believe that we can learn a considerable amount from the offering of 7-Eleven Japan and it's supply chain, and take this Japanese excellence to the rest of the world. To Japan, we bring extensive operational expertise and scaled global operations.
This transaction is an investment in the success of 7&i in Japan. The investment is about growth first and foremost, and it is not our intention to make store closures or job cuts. We also intend to invest in the 7-Eleven brand globally and extend the brands' iconic legacy.
We value the deep industry knowledge and expertise of local leadership teams, employees and franchisees of the 7&i business both in Japan and internationally. We look forward to the opportunity to engage with local leaders to understand their roles within the organization, to hear their perspectives on the business and opportunities, and to partner on the go-forward strategy. We take a humble approach to entering new markets and seek to retain, engage and partner with local teams to share best practices across the organization. We understand the importance of franchisees to the ongoing success of 7-Eleven across Japan and are committed to engaging with franchisees to better understand the difficulties they are facing day to day in their stores, and working with franchisees to appropriately align interests and incentives.
We also understand that retention and engagement of leadership, employees and franchisees will be critical to the success of any transaction, and we have a well-developed plan for governance and management incentives.
Respect for the Ito family
We have the deepest respect for the Ito family, and the legacy they have created through their ownership and stewardship of 7&i, a true icon and industry leader for many years. We would strongly welcome the opportunity to engage with the Ito family to learn more about the business they have built and nurtured, and would welcome their ongoing partnership to guide the next chapter of growth in Japan.
Recognition of the role of 7-Eleven in Japan
We would like to take the opportunity to reiterate that we have understanding and respect for the role that 7&i plays across Japan, including in the nation's emergency response system. Couche-Tard has been serving customers and communities for 45 years, including providing essential goods and services during times of crises. For example, during Hurricane Helene and Hurricane Milton in 2024, we re-opened, almost immediately, nearly all our several hundred impacted stores to provide water, fuel, and essential goods and services to affected communities.
We are committed to further understanding the role 7&i plays in the emergency response system and broader daily life. In a transaction, we would make a commitment to continue to operate in a consistent capacity for communities across Japan.
Couche-Tard takes data privacy very seriously and operate in compliance with data protection and privacy laws and regulations across our global network. We understand that 7&i processes large amounts of personal data, and we are committed to protecting the interests of Japanese customers.
Couche-Tard also takes seriously compliance with local laws and regulations in the countries in which it operates around the world and would approach Japanese authorities with the same seriousness and commitment to being a strong corporate citizen.
It is time for full engagement
We have reiterated several times over the past few months that we intend to be friendly and persistent in pursuing a transaction, which we believe is in the best interest of all stakeholders. We have done that in the face of significant frustration and distraction.
We look forward to fulsome engagement with 7&i so that we can reach definitive terms and move forward with a transaction that is in the best interest of all stakeholders.
About Alimentation Couche-Tard Inc.
Couche-Tard is a global leader in convenience and mobility, operating in 31 countries and territories, with more than 16,800 stores, of which approximately 13,100 offer road transportation fuel. With its well-known Couche-Tard and Circle K banners, it is one of the largest independent convenience store operators in the United States and it is a leader in the convenience store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, Belgium, as well as in Ireland. It also has an important presence in Luxembourg, Germany, the Netherlands, Poland, as well as in Hong Kong Special Administrative Region of the People's Republic of China. Approximately 149,000 people are employed throughout its network.
For more information on Alimentation Couche-Tard Inc., or to consult its audited annual Consolidated Financial Statements, unaudited interim condensed consolidated financial statements and Management Discussion and Analysis, please visit: https://corpo.couche-tard.com
Forward-Looking Statements
This press release includes certain statements that are "forward-looking information" within the meaning of the securities laws of Canada. Any statement in this press release that is not a statement of historical fact may be deemed to be forward-looking information. When used on this press release, the words "believe", "could", "should", "intend", "expect", "estimate", "assume", "aim", "align", "maintain", "continue", "effect", "growth", "position", "seek", "strategy", "strive", "will", "may", "might" and other similar expressions or the negative of these terms are generally intended to identify forward-looking information, although not all forward-looking statements include such words. Forward-looking information includes, but is not limited to, statements that address activities, events or developments that the Corporation or its management expect or anticipate will or may occur in the future, including statements with respect to the proposed transaction with 7&i (the "Proposed Transaction") pertaining to: the benefits of the Proposed Transaction; negotiations between the Corporation and 7&I in respect of the Proposed Transaction, including the scope and timing thereof; the consideration to be offered in respect of the Proposed Transaction; plans for future listings; the Corporation's financings plans, including with respect to the make-up of such financing and any effect thereof on the Corporation's capital structure, indebtedness and credit ratings; the required regulatory approvals in respect of the Proposed Transaction and any contemplated actions, undertakings or commitments of the Corporation in respect thereof; the intentions of the Corporation with respect to 7&i's business following completion of the Proposed Transaction, including with respect to 7&i's franchisees, management, employees and customers; and the definitive agreements with respect to the Proposed Transaction and the timing in respect of the execution thereof.
These forward-looking statements are based on certain assumptions and analyses made by the Corporation or its management in light of their experience and their perception of historical trends, current conditions and expected future developments, as well as other factors believed to be appropriate in the circumstances, including: the Corporation's ability to complete the Proposed Transaction within the anticipated timeframe; the conditions precedent to the closing of the Proposed Transaction (including the required approval from shareholders of 7&i and antitrust and regulatory approvals); sufficient and adequate collaboration of 7&i with regard to the Proposed Transaction; the Corporation's ability to otherwise complete the integration of 7&i within anticipated time periods and at expected cost levels; the Corporation's ability to retain and attract key employees in connection with the Proposed Transaction; management's expectations in relation to the future performance and economic conditions and other factors in relation to 7&i; the accuracy and completeness of the information (including financial information) provided by 7&i; the absence of significant undisclosed costs or liabilities associated with the Proposed Transaction; the ability of the Corporation to obtain financing on satisfactory terms to complete the Proposed Transaction and ability to execute post completion financing plan on satisfactory terms; the impact of the Proposed Transaction on the Corporation's capital structure, indebtedness and credit ratings; the ability to integrate the acquired business in an efficient and effective manner; the accuracy of the Corporation's assessment of bases or sources of synergies and the occurrence of the benefits anticipated; and the ability of the Corporation to take advantage of expected synergistic savings and increased operating efficiencies.
It is important to know that the forward-looking statements in this press release describe the Corporation's expectations as of the date hereof, which are not guarantees of its future performance or the performance of its industry, and involve known and unknown risks and uncertainties that may cause our actual results and performance to be materially different from that expressed or implied in such forward-looking statements. The Corporation's actual results could be materially different from its expectations if known or unknown risks affect its business, or if its estimates or assumptions turn out to be inaccurate. Such risks and uncertainties include, but are not limited to, the risks set forth under "Business Risks" in the Corporation's 2024 Annual Report as well as other risks detailed from time to time in reports that the Corporation files with securities regulators in Canada. Further, a change affecting an assumption can also have an impact on other interrelated assumptions, which could increase or diminish the effect of the change. As a result, the Corporation cannot guarantee that any forward-looking statement will materialize and, accordingly, readers are cautioned not to place undue reliance on these forward-looking statements.
All forward-looking information contained herein is expressly qualified in its entirety by this cautionary statement. The Corporation undertakes no obligation to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.
