Couche-Tard confirmed Monday that it has made a “friendly, non-binding proposal” to Japan’s Seven & i Holdings Co., which had a stock market value of about $38 billion as of Monday’s close in Tokyo. There’s no guarantee any agreement can be reached, the company cautioned — and there are significant barriers to completing such a massive deal. 

But if the Canadian company can pull it off, it would be the fulfillment of a dream for founder and Executive Chairman Alain Bouchard, who has been eyeing 7-Eleven for decades. Bouchard made his first approach around 2005, looking for a deal with the Japanese company for its US business, according to a biography published several years ago. The idea was shot down quickly.

Bouchard moved on, targeting a series of convenience store and gas station deals in the US and Europe before eventually turning his sights on Carrefour SA in 2021. Negotiations on a $20 billion offer for the supermarket chain died in the morass of French politics, but last year the company landed a smaller deal in Europe, acquiring about 2,200 stores from TotalEnergies SE for €3.1 billion ($3.4 billion).  

During a presentation in Phoenix, Arizona, last year, Chief Executive Officer Brian Hannasch and other executives made it clear to investors and analysts that they were nowhere near done. They laid out broad plans to scour the US, Europe, Latin America and Southeast Asia for acquisition targets. 

“We are experts in closing and integrating M&A around the globe,” they said in a document presented to investors. “We have the balance sheet to consider very large deals where only a few others can play.”

If a takeover is completed, it would be the biggest foreign acquisition ever by a Canadian company, according to data compiled by Bloomberg. 

“There has been a lot of ambition to go to Asia,” said Bloomberg Intelligence analyst Diana Rosero-Pena. Couche-Tard has less than 1% market share in the region, compared with 31% for Seven & i, she said. 

A deal may be valued at as much as $86 billion, she wrote, based on a multiple of 11.5 times earnings before interest, taxes, depreciation and amortization. Some analysts said Monday that Couche-Tard can afford the acquisition, but would likely finance it with a mix of debt and equity. 

Deals are in the company’s DNA. It all began in the 1980s, when Bouchard set up shop in a Montreal suburb, starting with a single convenience store, known as a dépanneur in the French-speaking Canadian province. 

He sought first to consolidate in Quebec and in Canada — adding hundreds of stores across provinces — then moved into international markets. Today it has about 16,700 stores spread in 31 countries and territories; about 75% of those locations have been added through acquisition. 

The Circle K owner still sees more opportunities in the US market. Less than an hour after confirming its proposal to Seven & i, the company announced the acquisition of 270 GetGo retail and fueling locations from Pittsburgh-based Giant Eagle Inc. for an undisclosed amount. 

Couche-Tard is now the second-largest US operator with more than 7,100 locations, representing about 5% of convenience stores, and another 2,100 in Canada. The acquisition of 7-Eleven’s 13,000 locations in those two countries has the potential to raise competition concerns.

“We would also expect some level of divestitures will need to take place within the US industry, but Couche-Tard would want to keep the Speedway assets,” said Raymond James analyst Bobby Griffin in a note to clients. Seven & i beat out Couche-Tard in an auction for Marathon Petroleum Corp.’s Speedway gas stations in 2020. 

A spokesperson for Couche-Tard declined to comment beyond the company’s Monday morning statement. In the company’s most recent quarterly earnings call, at the end of June, Hannasch told analysts that a few deal ideas had come across his desk, “a mix of both Europe and North America and a mix of size.”

“We’ll remain disciplined, we commit to that,” he said, “but we’d like to think we can land a few opportunities over the coming quarters.” 

CEO Change

Couche-Tard has had only two CEOs in its history — Bouchard, who’s one of Canada’s richest people with a fortune of about $8 billion, and Hannasch. That will change on Sept. 6, when Chief Operating Officer Alex Miller takes the helm. Hannasch plans to remain with the organization as a special adviser for the next couple of years, with a focus on M&A. 

Couche-Tard serves millions of customers a day with fuel, food, snacks and tobacco. About three-quarters of its revenue comes from fuel, where scale matters: the company is known for flexing its negotiating muscle to generate higher margins on gasoline. 

In recent years, the company has advanced a strategy to improve its in-store sales, with fresh food products such as hot sandwiches, pizza, chicken and other meals. Its merchandise and service business enjoys gross margins that are three times that of the fuel business.