Trillions to buy out Japan’s 7-Eleven owner?

And here you were, assuming 7-Eleven was simply the place to get that 2am rubbery hotdog and balance it out with a fresh diet coke.

Seven & i Holdings, the Japanese owner of the 7-Eleven convenience store chain, has just received a rare takeover bid that’s piqued the world’s attention.

The first 7-Eleven opened in Dallas in 1927 as the ‘Southland Ice Company’. As it diversified out of ice (seriously), it changed its name before settling on ‘7-Eleven’ to tout its new longer hours, which were presumably a big deal at the time.

Today the chain has grown way beyond Texas, with 85,000 stores globally. That’s more than McDonald’s or Starbucks. Almost a third of them are in Japan alone.

Who cares? We love a quality Slurpee and day-old donut as much as the next sleep-deprived diplomat, but there’s more at play here.

The non-binding offer submitted by Canadian convenience store giant Couche-Tard (which owns Circle-K) could point to a new era for Japan’s economy.

Here’s why. Couche-Tard made its offer public on Monday and, while key details – including the basic structure and price – are still secret, it could go way beyond its ¥5.6T ($38B) market valuation at the time the news broke.

That’d easily make this the largest foreign takeover of a Japanese company in history. But this obscures the bigger point here: foreign takeovers in Japan are rarer than fresh food at a 7-Eleven (okay, Japan’s convenience stores – or konbini – are famed for their fresh food, and that approach is headed for the US).

For decades, it’s been the opposite: Japanese firms and conglomerates have long criss-crossed the globe to do the buying rather than be bought.

Why?

1. Flat growth – Facing ‘lost decades’ after a spectacular asset bubble popped in the 1990s, Japan’s cashed-up companies ventured abroad for growth
2. Easy finance – These same firms have had a little help bank-rolling their spending sprees, with rates at home below 1% since 1995, and
3. Cautious execs – Japan’s managers (backed by some protectionist vibes out of Tokyo) haven’t shown much interest in selling, instead prioritising stability over shareholder value.

That’s partly why Seven & i just bought America’s Speedway and Sunoco chains. But all of the above factors (and more) have shown some movement lately: 

1. After years of gradual reform and loose monetary policy, we’ve finally seen wages growth and even inflation pick up
2. Against that backdrop, the Bank of Japan has finally lifted rates, though they’re still low
3. Authorities also passed meaningful corporate reforms last year pushing executives to re-think capital allocation and shareholder interests, and
4. The yen is at record lows, making it cheaper for foreign firms to snap up companies in Japan (while making the vice-versa more expensive)

Now, to be clear, Japan still has some major structural challenges (who doesn’t), like an ageing and shrinking population. But the Canadians crunched all the data – plus a 20% slump in Seven & i stock since February, on weak overseas earnings – and decided to make a move.

And in doing so, they’ve sent another signal that Japan may just be changing.

INTRIGUE’S TAKE

This deal won’t be easy. It’ll face antitrust scrutiny in both Japan and the US, lest some new monopoly emerge and start jacking up Slurpee prices on us. And 7-Elevens are part of the fabric in Japan, so we might see political resistance to a foreign sale.

Plus… anyone who’s done business there will have heard of ‘nemawashi’. It translates literally as ‘turning the roots’, and referred originally to the prep work for transplanting a tree: spend more time loosening those roots, and you boost the chances the tree will thrive in its new home.

In a corporate context, it’s all about the (very time-consuming) informal process required to get everyone on-board for a proposed business change.

And yet… there’s reason to believe Couche-Tard has been doing its nemawashi for a while now – it reportedly first approached Seven & i back in 2020. So if the roots are now loosened, and if the price is right, Seven & i’s board might have a tough time saying no.

And that’d mean a big shake-up for Japan.

Also worth noting:

• Japan’s Seven & i Holdings came into existence in 2005, following a restructure of various sister firms (including Denny’s Japan!).
• The ‘i’ in its name is a nod to Masatoshi Ito, who died in 2023 aged 98. He’s often credited with transforming 7-Eleven into a global empire, after his company first bought a 70% stake in 1991.