Couche-Tard's 7-Eleven overlaps face skeptical scrutiny from US FTC
Circle K operator Alimentation Couche-Tard is likely to face tough antitrust scrutiny from the U.S. if it proceeds with its $47.2 billion takeover bid for 7-Eleven owner Seven & I Holdings.
The companies are in direct competition in thousands of locations across the United States. Data compiled by Bloomberg shows that more than 45 percent of Circle K's are within three miles of a 7-Eleven or comparable store.
Jennifer Rie, an antitrust analyst at Bloomberg Industries, said there is a very high likelihood that the U.S. Federal Trade Commission could categorize the level of concentration as problematic.
The data "suggests that there will be a lot of overlap that will need to be closely scrutinized by the FTC," she said. "Divestitures will likely be required."
Canada-based Couche-Tard - which operates more than 6,700 Circle K stores in the US - is seeking to acquire the Japanese owner of 7-Eleven and Speedway, which has about 13,300 stores in the US. The deal would unite the No. 1 and No. 2 convenience store chains in the US, according to the industry magazine CSP, which publishes an annual ranking.
Alain Bouchard, founder and chief executive of Couche-Tard, said the company was working on solutions to any antitrust issues.
"We have of course read comments about possible obstacles that we could face in North America from the US FTC and we have an answer to that," Bouchard said in an interview. "In the 74 acquisitions we've made, we've had many discussions with the FTC and have always been able to find a good solution."
Seven and I declined to comment.
After its initial offer was rejected, Couche-Tard raised its bid and proposed $18.19 per share, or 7 trillion yen ($47.2 billion), last month, Bloomberg reported. A deal between the two companies would create a global convenience store giant with more than 100,000 stores worldwide and 20,000 in the US.
According to Bloomberg's analysis, there were 8,077 instances in which one or more Circle K stores were within 3.2 kilometers of at least one 7-Eleven or related store. To eliminate these overlaps, the merged company might have to divest up to 2,463 stores, or 12.31% of the outlets that would be owned by the merged company.
The FTC, headed by Lina Khan, views large mergers with skepticism. The agency has filed a lawsuit to prevent Kroger from acquiring Albertsons - which would be the largest grocery deal ever - and has been scrutinizing potential deals in both the grocery and oil markets because of concerns about persistent inflation.
In merger reviews, antitrust regulators often look at the locations of companies, assuming that nearby stores compete with each other but that a merged company could close one, limiting consumer choice. Authorities often try to get companies to sell locations or, if too many stores would have to be divested, they try to prevent a deal altogether.
California would be the hardest hit by a potential deal. There, 927 7-Eleven or related stores are located near Circle K stores, according to Bloomberg's analysis. In Texas and Florida, more than 500 Circle K stores would be affected.
Both Couche-Tard and 7-Eleven were involved in previous mergers in which the FTC required divestitures that focused primarily on fuel retailing, Rie said. In those deals, the FTC considered stores within a 3-mile (4.8-kilometer) radius. When 7-Eleven acquired Sunoco's retail stores in 2018 and later Speedway in 2021, the agency required the companies to sell 76 and nearly 300 stores, respectively, to address concerns about the impact on retail gas networks.
Couche-Tard's purchase of Holiday Companies in 2018 also required divestitures. Both Couche-Tard and 7-Eleven were later fined by the FTC for not fully complying with the terms of these settlements - an indication that the agency continued to monitor both companies after these deals.
Source: https://www.japantimes.co.jp/
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