DALLAS -- The acquisition last week of 7-Eleven Inc. by its majority shareholder places the world's largest convenience store chain in the hands of a newly formed Japanese conglomerate. Ultimately, the new ownerSeven-Eleven Japan Co. Ltd.hopes to improve the quality of the U.S. stores after conducting a review of 7-Eleven Inc.'s operations, management, corporate structure and properties, according to a story in the Dallas Morning News.
"We plan to increase our investment in merchandising, store renovation, distribution and logistics, and information [image-nocss] technology to better position the company for future profitable growth," said Jonathan Gasthalter, Seven-Eleven's U.S. spokesman. Gasthalter did not know when the review of the U.S. company would begin or how long it will last.
With the deal, Dallas-based 7-Eleven became a wholly controlled subsidiary of Tokyo-based Seven-Eleven Japan, its hugely successful Japanese licensee that until now had owned a 73% stake in its U.S. counterpart. Earlier this year, Seven-Eleven Japan agreed to become a subsidiary of a new Japanese company it helped form. In September, it teamed up with its parent company, Ito-Yokado Co. Ltd., and Denny's Japan Co. Ltd. to form Seven and I Holdings Co. Ltd. The "I" stands for innovation and "ai," the Japanese word for love.
7-Eleven employs about 31,500 workers, including 3,443 in the Dallas-Fort Worth area, according to the Morning News report. Earlier this year, the company announced plans to build a headquarters in downtown Dallas, which was widely viewed as a major boost to the city's revitalization efforts.
Although the acquisition could mean additional investment for the chain, it could also lead to a slowdown in the rate of new-store expansion, according to the newspaper. With 36 consecutive quarters of higher same-store merchandise sales, 7-Eleven has been trying to open new stores and update existing ones. It expects to open around 90 to 95 new stores this year.
The $1.2 billion deal proved a boon for 7-Eleven shareholders, who received $37.50 a share. That's a 32% premium over the closing price of 7-Eleven shares the day before the Sept. 1 tender offer. "It's very much in line with traditional buyouts," Adam Sindler, a research associate at Morgan, Keegan & Co., told the newspaper. He added that 7-Eleven shareholders did well.
Seven and I Holdings, which is publicly traded on the Tokyo Stock Exchange, focuses on seven businesses: convenience stores, superstores, supermarkets, restaurants, department stores, financial services and information technology services. Besides 7-Eleven convenience stores, its holdings include the Ito-Yokado superstores, Denny's restaurants in Japan, Oshman's Japan, the York-Benimaru supermarkets and Robinson department stores.
Seven-Eleven Japan also is no stranger to its American counterpart's Big Gulps, Slurpees and Big Bite hot dogs. It controlled five of nine seats on 7-Eleven's board of directors thanks to the majority stake it gained in the company in 1991.
Opening its first 7-Eleven in Tokyo 31 years ago, Seven-Eleven Japan now operates nearly 11,000 of the stores in its home country alone. That compares with 5,818 stores for 7-Eleven Inc. in the United States
Soon after the buyout deadline passed, Seven-Eleven Japan said it had set up in the United States two holding companies of 7-Eleven Inc. The new companies, SEJ Service LLC and SEJ Finance LLC, both located in Delaware, are wholly owned by the Japanese convenience store operator. The investment amount was not available, but Seven-Eleven Japan plans to allocate 60% and 40%, respectively, of the issued stocks of its U.S. subsidiary IYG Holding Co. to the two companies, it said.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.