It sometimes comes as shock to North Americans that 7-Eleven is owned by the Japanese. It has been since 1991 when it bought a bankrupt Southland in Dallas, Texas that owned the company. The late 1980s and 1990s saw major purchases by Japanese companies of assets in North America. At the time it caused all sorts of fear. However, Sony and 7-Eleven among them, have been good owners of these assets. Perhaps, they might have been run better because they were Japanese.
At the moment Nippon Steel is trying to takeover U.S. and both Republicans and Democrats are vowing to block the deal. The U.S. steel manufacturer says that without the takeover thousands of American jobs will be lost. With this in mind. a decision either way on the steel purchase could factor in on the 7-Eleven purchase by Canada's largest convenience store owner. If the steel deal goes through, questions will arise about the ability of takeovers going the other way. If the deal doesn't go through, Japan can make similar arguments about why the 7-Eleven deal should not go through.
Circle K has been around as a brand in western Canada since 2018. It was part of a re-branding of the Mac's Stores that dotted the city for decades. Mac's logo once had been a cat's head that eventually became a red owl. Circle K's owner Couche-Tarde essentially means "night owl."
The first acquisition bid by Circle K has been rejected as being too low and not taking into account antitrust. The combined assets of 7-Eleven and Circle K in North America could bring calls for a sell off of some stores and gas stations. A Circle K and a 7-Eleven on the same corner from one another would hardly be competitive.
People in Winnipeg are familiar with this with Sobeys and Safeways using the same flyers while often being across the street from one another. Sobeys was required to sell some stores in Winnipeg to complete their purchase but there are still many stores very near one another. This is the case across much of western Canada.
The owners of 7-Eleven have asked the government to declare the company part of their national security core assets. The Japanese government seems reluctant to do that since the company essentially bought a U.S. company and asking that it be declared forever Japanese could hurt other trade. As mentioned before, Nippon Steel's deal for U.S. Steel depends on each country mostly staying out of it except where it comes to antitrust.
While 7-Eleven might have the same owner in Japan and Canada, they operate with their local customers in mind. However 7-Eleven has far fewer locations in Canada than what is found in Japan. In Canada all magazines have been purged from the stores. There used to be a whole row. Japanese 7-Elevens still have a row of them. It is not uncommon to see 20 or 30 people casually reading inside stores. Some stores are dropping the magazines but it is at a slower pace that it has been for Canada.
What Japan has purged are Slurpee machines in some stores. They just not big sellers compared to Canada. In some stores there a 20 flavours of Slurpees lined up along with the Big Gulp dispensers. Japan sets up more space for food sales, especially, rice balls known as onigiri. Chicken and other items are fresh every day at the store. With literally thousands of stores in Japan, deliveries are made multiple times a day of product. Canada has under 620 7-Eleven stores for the whole country. Winnipeg has many stores but at least four due to issues of lease or crime have closed. The city could lose ten more and crime has been blamed by top execs of the corporation.
Canada has its own executive offices of 7-Eleven in Surrey, B.C. and world-wide executive offices are in Irvine, Texas. Ownership and management of 7-Eleven is in Tokyo. Canada has it's execs appointed by world head office. For the first time in 15 years it is headed up by a Canadian.
All things being equal, a takeover of Circle K by 7-Eleven is just as likely a scenario. The issues of antitrust would still apply. The 7-Eleven company has outbid Circle K a number of times for U.S. assets. The only reason Circle K appears stronger is that they have been assessed as having more market value and are favourable to shareholders.
If Circle K takes over 7-Eleven, it might eventually get approved by their board only if there is a plan that the U.S. and Japan and other countries can agree on. In Japan the Fair Trade Commission could order some aspects of 7-Eleven divested such as banking or other aspects of the business. However, since Circle K is not in the Japanese market in a big way, it will be curious what concerns they might raise.
While 7-Eleven is a very successful company, it is has underperformed the market for five years. It is has not increased shareholder value despite acquisitions. The market valuation for the company is below Circle K which has had very successful shareholder increases. There are shareholder activists in 7-Eleven who are pushing the company to do better. They might not support the Circle K bid based on not enough money offered but they won't support the company running to the government to thwart the takeover based on nebulous national security claims. Nor will the government likely allow two Japanese konbini companies to combine to take a 60% presence in Japan just to keep out Circle K.
As good a company as 7-Eleven is, the low shareholder value makes them vulnerable. Couche-tarde has asked for a meeting to see what the board of 7-Eleven might be looking for. It is a meeting that that they can't easily rebuff. If 7-Eleven itself is looking for new acquisitions around the world, it can ill afford to look as if they can buy assets and no Japanese asset is available for sale due to their efforts and government protection.
Make no mistake, the thousands of 7-Elevens in Japan have become part of the culture and a critical supply chain provider of so much. I was present when in Japan when the purchase took place in 1991. The stores were popular but in the last decades they have taken off and are clearly everywhere. Other konbini stores that are prolific are FamilyMart, Daily Yamazaki and Lawson. In my hometown on Tsuru, I had a Daily store and a FamilyMart within walking distance. I preferred FamilyMart for their fresh sandwiches. However, both had fresh foods I liked that they were close. A 7-Eleven was about a 20 minute drive from by scooter so I went there from time to time. Back then the Slurpees were limited to a few flavours and like a lot of Canadians outside Canada, I felt the Slurpees were different and not as good. I have felt this way about Slurpees in the U.S. as well.
As far as the rest of the store went, it had snacks and product not found in Canada. Fresh sushi is always there as well as rice balls. However, at Japanese 7-Elevens you can buy concert tickets and pay bills in addition to the ATM. All Japanese stores have free Wi-Fi which is a popular attraction. It doesn't appear to be the case in Canada or the U.S. as a corporate-wide thing. It is just a few examples of how service is all about how Japanese 7-Eleven's operate.
Canada does innovate in ways unique to its market. Throughout Canada, a large number of stores will be serving alcohol in a small lounges. In Winnipeg that will be at their Ness location where 10 seats will be reserved for 18 and older for cider, beer and wine. The area will be open 12 to 11 every day. Some people thought it was a bad idea but some people thought movie theatres and alcohol was a bad idea and today Cineplex in Canada outperforms the market.
Some 7-Elevens in Canada sell gas but it is seen less in Manitoba than other areas. Circle K in North America is more likely to be a seller of gas. Another offer is likely for 7-Eleven from Circle K soon. However, it is entirely possible that Circle K makes an approach to Mitsubishi to buy Lawson instead. The convenience store subsidiary is enormous as well and might be more amenable to a purchase offer.
Regardless if Circle K and 7-Eleven become one company, it is likely they will continue to innovate and offer more fresh food. In Winnipeg, the big question is how will 7-Eleven and other convenience stores deal with the issue of crime. In Japan crime is not something most of the stores have to worry about. In much of Japan, vending machines are everywhere which seems impossible in much of Canada.
If the companies ever combined in Canada, it would mean the 2,100 stores of Circle K and the 620 stores of 7-Eleven would start to have the synergy that Japan has to keep prices down and deliveries coming a few time a day. It still would come close to the amount of stores Japan has and how much competition there is.
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