Seven & i Holdings – the biggest convenience store franchiser in the world – will buy Speedway, the convenience store component of U.S. oil refiner Marathon Petroleum, for $21 billion in cash, the companies disclosed on Monday.
The deal is the second-biggest acquisition of a U.S. target for 2020 and the largest yet for Seven & i, a retail behemoth with 69,000 stores around the world including the popular 7-Eleven branches and the Ito-Yokado supermarkets in Japan. Seven & i shelled out $3.3 billion three years ago to acquire Sunoco LP gas stations and convenience stores in an aggressive campaign to expand its presence in the U.S.
Seven & i is the largest player in the U.S., operating around 9,000 7-Eleven convenience store branches. Speedway is the third-biggest convenience store chain with around 4,000 outlets, while Canada's Alimentation Couche-Tard, which operates Circle K stores, is the second biggest with about 8,000 stores.
Seven & i backed out from its initial offer to buy Speedway this spring, failing to reach a deal on the buyout price in exclusive talks with Marathon after the price tag was increased. The price offered was reported to be around $22 billion. But Marathon made another bid proposal to sell Speedway as the company's sales performance worsened because of historically low oil prices and a plunge in oil demand caused by the pandemic.
After-tax net proceeds from the acquisition, which both boards of the two companies have approved, are projected at $16.5 billion, Marathon disclosed, pointing out that it will use the proceeds to settle its existing debt. For Seven & i, the sale helps it shift its priorities beyond a saturated market in Japan.
In a statement, Marathon Chief Executive Michael Hennigan said that the announcement "crystalizes the significant value of the Speedway business ... and delivers on our commitment to unlocking the value of our assets," Rebecca Elliott quoted Hennigan as saying in her MarketWatch report.
Marathon follows a series of energy groups that are shedding retail links to concentrate on producing fuel. The deal comes as retailers look to shift focus in the wake of an ongoing global health crisis, which has further tangled a segment of the market already being roiled by the boom of e-commerce.
The deal, which is estimated to close in the first quarter next year, includes a 15-year fuel supply contract for around 7.7 billion gallons a year in connection with the Speedway business, Marathon, the biggest U.S. refiner by volume, said.
