7-Eleven, Couche-Tard Look to 2,000+ Store Divestment as Merger Talks Continue: Antitrust Remains a Major Concern

The ongoing merger talks between 7-Eleven parent Seven & i and Alimentation Couche-Tard have certainly been interesting for investors, analysts, and onlookers concerned with the potential deal.

Most recently, the parent company published a March 10 letter to shareholders outlining the current state of negotiations — one which involved a significant divestment process that could involve as many as 2,000 (or more) “divestiture stores,” which would need to be worked out between the two c-store giants.

“The overriding goals have been to address both value and certainty of closing,” the letter said.

Seven & i underscored the likelihood that a combination of 7-Eleven and Couche-Tard stores held by a single entity would face substantial scrutiny from antitrust authorities, per CSP.

“A consistent threshold issue that we have raised from the outset has been how to put together a divestiture package involving an unprecedented number of 2,000 or more overlapping stores that could be divested to a viable, credible and independent buyer in a manner that could be stood up to operate effectively on a go-forward basis and assure competition between the buyer and ACT post its acquisition of 7&i,” the letter continued.

Seven & i cited the “cautionary tale” of the failed Albertsons and Kroger merger which fell through late last year — following two separate injunctions — ending with a lawsuit being filed by the former against the latter. Antitrust concerns were top of mind throughout the company’s letter to shareholders, and it was suggested that 7-Eleven and Alimentation Couche-Tard work together to mitigate and reduce these roadblocks before any formal merger agreement was pursued.

3 Paths Forward for 7-Eleven and Couche-Tard Merger, but Only One Has Been Selected

7-Eleven’s parent company then proceeded to lay out three potential avenues forward for the proposed merger:

• Alimentation Couche-Tard could enact a “clean sweep” of all stores, including Circle K locations, across the U.S., removing antitrust risk altogether.
• Alimentation Couche-Tard could execute a definitive divestiture agreement with a prospective buyer of the 2,000 aforementioned stores as a condition necessary to further the signing of a merger agreement.
• Together, the two companies could “immediately map out the viability of a divestiture process by defining operational, management, and financial characteristics of the group of stores to be sold and identifying potential buyers.”

In the end, it was the third option that Alimentation Couche-Tard decided to move forward on, according to the shareholder letter.

Seven & i stated, “We are pleased that ACT has recently agreed to explore the third option we proposed above, and joint outreach by financial advisors to ACT and 7&i to potential buyers has begun. We and our advisors believe we can now make progress towards determining whether a credible and actionable remedy and divestiture package can be achieved that would allow a realistic assessment of ACT’s proposal under the areas we noted above — value and certainty of closing.”

However, despite all apparent signs of progress, it remains to be seen whether a deal can be struck — or whether governmental antitrust regulators will approve of the measures taken, should a merger between 7-Eleven and Couche-Tard occur.