Couche-Tard goes on charm offensive for Seven & i with Tokyo visit

[NEW YORK] Alimentation Couche-Tard will seek to address antitrust concerns of Japan’s Seven & i as the Canadian company’s management kicks off a Tokyo visit to push forward talks for its US$47 billion bid for the operator of 7-Eleven convenience stores.

The Circle-K owner has been pursuing Seven & i for months even as it has received a frosty reception from the Japanese retail giant, in what would be Japan’s largest-ever foreign buyout if the deal is completed.

Couche-Tard will hold its first press conference in Tokyo on Thursday since it announced a bid for Seven & i in August as part of its efforts to win over a Japanese public sceptical of a foreign takeover of a prized national asset.

On Tuesday, Couche-Tard said it was confident there was a “clear path” to overcome US regulatory hurdles in its proposed acquisition of Seven & i and expressed frustration at the 7-Eleven owner’s “limited engagement.”

Couche-Tard also said it had been working with Seven & i on a plan to divest some of their stores in the United States.

Seven & i’s newly appointed CEO Stephen Dacus, however, has reiterated that significant regulatory hurdles stand in the way of a deal. The firms are the top two players in the US convenience store market, with about 20,000 locations between them.

Antitrust issues

Couche-Tard management’s trip to Tokyo and the engagement with Seven & i on antitrust concerns underscore the lengths to which dealmakers would go to ensure deal certainty amid US regulatory scrutiny.

To engage in detailed divestment discussions for antitrust purposes before a deal is agreed or any confidentiality agreement is signed is uncommon in transactions, deal advisers said.

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“I can’t say I’ve seen a case where prior to a merger agreement being executed the entire divestiture package and buyer were set in stone and baked into the merger agreement,” said Kathy O’Neill, a partner at law firm Fried Frank.

But she said working on a divestiture package before a merger agreement was reached would help to potentially reduce the risk of surprise and time and effort put into chasing a deal.

Tim Cornell, a litigation partner and member of the Debevoise & Plimpton’s Antitrust Group, agreed the airing of antitrust concerns before a deal was announced was not typical.

“In certain circumstances, buyers will test the waters with regards to a divestiture package especially where they’ve identified that’s what is needed,” he said.

Couche-Tard sweetened its offer in October and has said it remained committed to the deal, after a competing US$58 billion management buyout proposed by Seven & i’s founding family failed to materialise. REUTERS