From the handshake deal to the $47 billion takeover offer

“If you don’t succeed at first…try, try again…”

It is an old motto of determination and perseverance. And one that Canadian company Alimentation Couche-Tard has clearly taken to heart.

In August, Asian media reported that the Canadian convenience store giant made a friendly offer to buy Japan’s Seven & I Holdings Inc. (OTC: SNVDY) for $38.5 billion.

Seven & I Holdings is the primary owner of 7-Eleven convenience stores in the United States and Japan.

After its initial offer was rebuffed, Couche-Tard made a second offer to buy the Japanese giant – this time increasing Seven & I’s valuation by more than 20%.

The deal would be worth about $47 billion and, if completed, would be the largest acquisition of a Japanese company by a foreign company.

With that in mind, I wanted to revisit an article I wrote about 7-Eleven, including an old urban legend between two American convenience store chains that you would never expect to happen today.

Sometimes a handshake is all you need

In the mid-1950s, Burt Holmes, a native of Tulsa, Oklahoma, traveled to Dallas.

During this ride, Holmes noticed a row of 7-Eleven stores crowded at each stop.

Holmes had the idea of ​​opening a chain of small grocery stores with a former middle school classmate, Chester Cadieux.

He called these stores QuikTrip.

In 1971, Holmes and Cadieux purchased Wichita-based Shopeze and expanded QuikTrip to 120 stores in Oklahoma and Kansas.

QuikTrip’s rapid rise took place everywhere except Oklahoma City, the crown jewel of the Kansas-Oklahoma market.

I asked my wife about this since she worked at 7-Eleven in Wichita when she was younger to buy a car.

She told me about a gentleman’s agreement between Cadieux and Bill Brown, the founder of 7-Eleven in Oklahoma.

The two agreed that Cadieux would stay out of Oklahoma City as long as Brown stayed out of Tulsa (where QuikTrip is headquartered).

Legend has it that Cadieux agreed to the deal because Brown had given him business advice and was considered Cadieux’s mentor.

However, gentlemen’s agreements concluded with a handshake were more common back then.

You took a man at his word – no extensive legal team required.

That changed in 2005, when Japan-based Seven & I Holdings Co. (OTC: SNVDY) made 7-Eleven a wholly owned subsidiary.

But even after the purchase, 7-Eleven stayed out of Tulsa, and QuikTrip stayed out of Oklahoma City…until this year.

In February 2024, QuikTrip finally broke into the Oklahoma City market with the opening of its first store in Moore – a suburb of the state capital.

Where the deal stands now

Although you may not know the name Couche-Tard, you probably know the convenience store chain it operates…Circle K. The company owns and operates nearly 14,000 stores worldwide.

It’s not like Couche-Tard is a new player in the convenience store game.

After receiving the initial proposal, Seven & I officials responded as expected: They said the deal “significantly undervalues ​​our independent path.”

It should be noted that although Japanese 7-Eleven stores look like their American counterparts from the outside, the inside is completely different.

Stores in Japan are more like grocery stores than convenience stores… with shelves stocked with full meals and a wider variety of food and drinks.

Seven and I will do what companies do in their situation: look at the deal and see if it makes financial sense.

At least the news about Seven & I’s revised offering on the Tokyo Stock Exchange certainly didn’t hurt:

Seven & I shares hit a 6-month high on the Tokyo Stock Exchange

Seven & I’s Japanese shares shot to a six-month high on the day the new offer was announced.

Couche-Tard’s new offer is to pay Seven & I $18.19 per share, which is still higher than the $15.75 price the shares set earlier this week.

There are other complexities to this deal – such as antitrust issues in the US – but it’s safe to say it will take more than just a handshake to get a takeover over the finish line.

See you next time…

Safe trading,

Matt Clark, CMSA®

Chief Research Analyst, Money and Markets