Seven & i Holdings beats out rival with $21bn bet on US

Bloomberg

Seven & i Holdings Co, the world’s largest convenience store operator, is betting $21 billion on the future of quick-stop shopping in the US, reviving a once-abandoned deal to make sure the target didn’t fall into the hands of a competitor.
The global operator of the 7-Eleven franchise agreed to buy Marathon Petroleum Corp’s gas-station business, adding 3,900 Speedway outlets to clinch a dominant position of almost 14,000 stores in the US and Canada.
Seven & i pushed ahead despite the uncertainty of the pandemic and investor pessimism. Its shares declined 4.8% in Tokyo on Monday. Marathon rose 13% before regular US trading hours.
The Japanese retailer returned to strike a deal after stepping away from negotiations earlier this year.
Concerned that Canada’s Alimentation Couche-Tard, the second-largest convenience store operator in North America, would snap up Speedway for itself, Seven & i decided to aim for scale.
The transaction will give 7-Eleven a presence in 47 out of the top 50 metropolitan markets in the US and a commanding lead in the country’s convenience-store segment.
“The disadvantage of not winning this bid would have been other competitors expanding their business,” Joseph DePinto, president of the 7-Eleven Inc US operation, said on a conference call Seven & i owns the 7-Eleven brand after operating and expanding the franchise in Japan over the past four decades, buying out the original US business. Faced with a declining population at home and seeking to grow beyond the existing stores in the US, Seven & i embarked on an expansion plan that included the $3.3 billion purchase of Sunoco LP gas stations and convenience stores three years ago.
“This isn’t as crazy as people think it is,” said Michael Allen, an analyst covering Japanese retailers at Jefferies. “The US market has recovered a lot faster than the Japan market, so I don’t see any issues with that bet.”
The combination of gasoline and convenience stores with expanded offerings, and experience from previous integrations will help the company grow despite the uncertainty and industry turmoil wrought by the coronavirus pandemic, according to Ryuichi Isaka, Seven & i’s chief executive officer.
“This is a once-in-a-millennium opportunity,” Isaka said on the conference call. “This is a historic first step as we seek to become a global retailer.”