Canadian bid to own 7-Eleven could be subject to US antitrust scrutiny

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U.S. antitrust regulators may challenge any proposal by Canadian retailer Alimentation Couche-Tard to combine with Japanese operator 7-Eleven, two people briefed on the matter said, over concerns that a deal would raise prices for consumers and would affect the labor market.

A tie-up between Couche-Tard, which operates the Circle K brand, and Japan’s Seven & i, which controls the world’s largest chain of convenience stores, would create one of America’s largest retail chains.

The deal, which would be the largest takeover of a Japanese company ever attempted by a foreign buyer, could also attract attention in Tokyo under the Foreign Trade and Exchange Act, two merger and acquisition lawyers in Japan.

U.S. regulators have not yet reviewed the details of any proposal because the two companies have not reached an agreement, but people close to the deal said the deal should be reviewed for its potential impact on buyers.

“It’s still early to make an assessment because we don’t have an agreed deal, but you can expect this deal to be challenged,” said a person close to U.S. regulators.

Another person said that if the two companies were to reach a deal, they would have to offer significant remedies or divestitures to win approval from U.S. regulators.

A third person said the merger between Seven & i and Couche-Tard would be treated similarly to the $24.6 billion deal between US supermarket giants Kroger and Albertsons. The Federal Trade Commission sued to block the supermarket deal, arguing it would eliminate competition between the two companies, raise food prices and hurt product quality and consumer choice. On Monday, Kroger sued the FTC to unblock the settlement.

7-Eleven operates more than 12,500 convenience stores in the U.S., while Couche-Tard has more than 7,000 retail stores, according to data from food consulting group Technomic.

Combined, they would control nearly 20,000 stores in most US states, nearly 10 times more than the next largest player, Casey’s, and employ more than 200,000 people.

U.S. antitrust regulators have been aggressive during the Biden administration, challenging the deals in court as well as in public opinion, prompting many companies to walk away from deals for fear of being blocked.

Bankers close to Seven & i said they believed the feasibility of a takeover was low and cited scrutiny from both U.S. regulators and possibly the Japanese government should the foreign takeover become politicized. Convenience stores in Japan are widely regarded as critical infrastructure in the event of an earthquake.

However, lawyers who have worked on large cross-border deals said antitrust objections from US regulators could be overcome by selling some stores. Couche-Tard could satisfy the FTC by selling 750 to 1,000 stores, analysts at two funds said.

Lina Khan, chair of the FTC, and Jonathan Kanter, head of antitrust at the Department of Justice, took a broader approach to competition rules, focusing beyond the pricing of goods and services to all aspects of market power.

A combination of Couche-Tard and Seven&i would risk raising the prices of drinks and food, as well as limiting job and employer choice in certain markets where the two companies compete directly with each other, people close to the authorities said. regulation.

Although many on Wall Street hope antitrust enforcement will be eased under a new Harris or Trump administration, both US presidential candidates are expected to give a clear mandate to regulators that any deals that raise inflation or reduce jobs be blocked .

Seven & i agreed to acquire the Speedway gas station business for $21 billion in 2020, giving the Japanese company an even bigger footprint in the US.

Couche-Tard announced Monday that it has expanded its network by buying 270 stores and gas stations in five US states, including Indiana, Pennsylvania and Ohio, from the Giant Eagle supermarket chain.