7-Eleven and Speedway: History of the Deal

IRVING, Texas — 7-Eleven Inc.’s $21 billion acquisition of Marathon Petroleum Corp.’s Speedway convenience-store network, the biggest deal in the sector’s history, was an on-again, off-again saga that has played out over half a decade, involving two of the top three c-store chains in the country.

Multiple bidders—including other top 10 companies—and activist investors played their parts in the story, as well, and of course federal regulators were there to stir the pot. And the pandemic threw a monkey wrench into the whole process and threatened to derail the deal.

Click through to take a journey through the whole transaction …

In November 2016, corporate investor Elliott Management sent a letter to Marathon Petroleum recommending it take specific actions to add $14 billion to $19 billion of value for shareholders. Elliott recommended that Marathon Petroleum immediately drop down all master limited partnership (MLP)-qualifying income to MPLX. Additionally, New York-based Elliott suggested conducting a full strategic review, giving careful consideration to a potential spinoff of Speedway.

Marathon initially signaled disagreement with Elliott’s plan, but later announced steps to pursue value-creating actions, including substantial dropdowns to MPLX. In 2017, it conducted an independent review of Speedway, deciding against a sale or spinoff. Elliott eventually voiced its support for the decision to retain Speedway.

In September 2019, Elliott, which manages funds that represent approximately a 2.5% economic interest in Marathon Petroleum, called for it to be split into three separate companies: Speedway LLC, a standalone retail company, MPLX LP as a standalone midstream company and Marathon Petroleum as a refining company, believing the split would unlock more than $22 billion in value for shareholders and an incremental $17 billion in value through achieving the operating full potential of Marathon’s asset base.

In October 2019, Marathon Petroleum announced plans to spin off Speedway.

By January 2020, Marathon Petroleum was exploring a sale rather than spinoff of Speedway, and companies including Alimentation Couche-Tard Inc., Laval, Quebec, Seven & i Holdings Co. Ltd., Tokyo, and U.K.-based private equity firm TDR Capital, London, submitted bids. Couche-Tard reportedly was preparing to divest 1,250 convenience stores to avoid antitrust concerns as a condition to allow it acquire Speedway. TDR Capital was reportedly interested in merging Speedway with one of its portfolio companies, Blackburn, U.K.-based c-store operator EG Group, which, through Westborough, Mass.-based EG America LLC, owns the Cumberland Farms c-store chain.

In March 2020, Seven & i Holdings Co. Ltd., the Tokyo-based parent company of 7-Eleven Inc., Irving, Texas, dropped its bid to acquire Speedway for approximately $22 billion, citing the COVID-19 pandemic.

In June Marathon Petroleum also moved the target date for the separation of Speedway from fourth-quarter 2020 to “early 2021” because of concerns over the pandemic, it said.

In August 2020, Marathon Petroleum announced a definitive agreement to sell Speedway to 7-Eleven for $21 billion.

The deal includes a 15-year fuel supply agreement for approximately 7.7 billion gallons per year associated with the Speedway business. The company expects incremental opportunities over time to supply 7-Eleven's remaining business as existing arrangements mature and as 7-Eleven adds new locations.

"This transaction marks a milestone on the strategic priorities we outlined earlier this year," said Michael Hennigan, president and CEO of Marathon Petroleum. "Our announcement crystalizes the significant value of the Speedway business, creates certainty around value realization and delivers on our commitment to unlock the value of our assets. At the same time, the establishment of a long-term strategic relationship with 7-Eleven creates opportunities to improve our commercial performance."

The Speedway acquisition accelerates growth and diversification, said 7-Eleven. “Speedway is a great brand and a strong strategic fit for our business that significantly diversifies our presence throughout the North American market, particularly in the Midwest and on the East Coast,” said Joe DePinto, president and CEO of 7-Eleven.

The acquisition will give 7-Eleven approximately 13,375 c-stores in the United States and a presence in 47 of the top 50 most populated metropolitan areas in the United States, “positioning the company as a clear industry leader in a fragmented industry with favorable macroeconomic trends,” it said.

In late March 2021, the anticipated closing date of Marathon Petroleum Corp.'s sale of Speedway to 7-Eleven moved into second-quarter 2021, Marathon Petroleum said in a filing with the U.S. Securities and Exchange Commission (SEC).

Marathon Petroleum “previously referenced the first quarter of 2021 as the target for closing the transaction, but now is targeting closing early in the second quarter of 2021, subject to customary closing conditions and the receipt of regulatory approvals,” the filing said. “7-Eleven and the company continue to engage productively with the Federal Trade Commission in its review of the transaction.”

Marathon Petroleum declined to offer further specifics, but spokesperson Jamal Kheiry told CSP Daily News, "7-Eleven and the FTC continue to make progress toward the completion of the process, and additional time is required."

Meanwhile, the International Brotherhood of Teamsters weighed in, calling on the FTC to “pause” its antitrust review of the Speedway deal “until the agency has time to interpret, integrate and employ the antitrust legislation currently making its way through Congress, or at a very minimum, ensure that all competitive effects from the transaction have been fully considered and remedied.”

On April 28, 7‑Eleven signed a definitive agreement to sell 106 Speedway and 7‑Eleven sites in the Mid-Atlantic and Northeast to CrossAmerica Partners LP, a publicly traded limited partnership with headquarters in Allentown, Pa. The properties consist of company-operated sites that 7-Eleven sold as part of the divestiture process in connection with the Speedway deal.

CrossAmerica is a wholesale distributor of motor fuels, c-store operator and owner and lessee of real estate used in the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is indirectly owned and controlled by entities affiliated with Joseph Topper Jr., the founder of CrossAmerica Partners and a member of the board of the general partner since 2012.

“We intend to brand the sites as Joe's Kwik Mart, which is one of our proprietary store brands,” CrossAmerica CEO and President Charles Nifong said on the company’s first-quarter 2021 earnings call. “For Joe's Kwik Mart, we have been working on redeveloping and re-imaging this brand for the past 18 months. The timing of the acquisition corresponds perfectly with this re-branding initiative and allows us to accelerate our rollout of the re-imaging and refreshed Joe's Kwik Mart brand.”

On May 14, 7-Eleven Inc. announced officially that it had completed the acquisition of Speedway from Marathon Petroleum.

But the same day, Federal Trade Commission (FTC) Acting Chairwoman Rebecca Kelly Slaughter and Commissioner Rohit Chopra issued a statement saying the transaction might be illegal and that the deal raised “significant competitive concerns in hundreds of local retail gasoline and diesel fuel markets across the country.”

Two other commissioners—Noah Joshua Phillips and Christine S. Wilson—while still objecting to the closing, said in a separate statement that the issue is one of Slaughter’s own making. “Rather than resolve the issues and order divestitures (or sue to block the transaction), the acting chairwoman and Commissioner Chopra have issued a strongly worded statement,” they said. “Their words do not bind the merging parties, leaving consumers completely unprotected.”

7-Eleven and Marathon Petroleum defended the closing, saying that it was legal and that the companies satisfied all of the required closing conditions.

“7-Eleven is disappointed by the statement as it fails to acknowledge the facts that led to 7-Eleven closing the transaction,” the company said. “To be clear, 7-Eleven was legally allowed to close on the Speedway transaction today and statements or implications to the contrary are false.”

In a separate statement, Marathon Petroleum said, “The parties closed the transaction after all conditions to close were fully satisfied,” and Marathon Petroleum “is in receipt of the $21 billion sale proceeds, and Speedway and its assets are owned by 7-Eleven.”

7-Eleven and the FTC entered into an agreement permitting 7-Eleven to close on May 14, the company said, and it entered into a settlement at the end of April that resolved competitive concerns by divesting 293 fuel outlets.

“We were informed that the FTC staff, including leaders in the Bureau of Competition, recommended that the FTC commissioners approve that settlement,” the company said. “7-Eleven has been operating under the terms of that settlement agreement since it was signed and continues to do so.”

On May 11, Slaughter and Chopra said they wanted more time to review the agreement, 7-Eleven said. “7-Eleven took the request very seriously” it said, “but such a last-minute delay would have created enormous disruption to the lives of our new colleagues at Speedway and to the business. Given that there was no legal basis for such a delay and given that 7-Eleven was abiding by the negotiated settlement agreement, we closed today on schedule.”

On March 15, 7‑Eleven signed a definitive agreement to sell 124 Speedway and 7‑Eleven sites in the Midwest, Northeast, Florida and Utah to Anabi Oil, Upland, Calif.

Anabi Oil is a family-owned and -operated company with headquarters in Upland, Calif. It is one of the largest Shell branded wholesalers in California distributing to more than 200 stations under multiple major brands including its proprietary Rebel brand. The addition of these sites brings Anabi Oil’s retail portfolio to more than 450 c-stores nationally in 15 states. Anabi Oil is No. 23 on CSP’s 2021 Top 40 update of the 2020 Top 202 ranking of U.S. c-store chains by store count.

On March 17, 7‑Eleven signed a definitive agreement to sell 63 Speedway sites in California, Arizona and Nevada to Jacksons Food Stores, Meridian, Idaho.

The companies did not disclose the terms of the deal.

For Jacksons, the acquisition is part of a continued focus on growth and expansion into additional markets in the West, the company said. Jacksons owns, operates and supplies more than 1.100 stores across nine western states. The transaction will give it 59 stores in key California markets, many of which will be operating under the Jacksons or ExtraMile by Jacksons brands. Jacksons is No. 30 on CSP’s 2021 Top 40 update of the 2020 Top 202 ranking of U.S. c-store chains by store count. 

It could take a year for 7-Eleven to determine how it integrates Speedway into its c-store portfolio, according a report by the Springfield News-Sun.

“We are still working hard to finalize details for the future of the organization and expect this process to last well into 2022,” a 7-Eleven spokesperson told the newspaper.

Meanwhile, 7-Eleven, Inc., and participating independent franchise owners, however, are collectively recruiting as many as 40,000 new employees to fill positions at its U.S. stores, the company has announced, including at Speedway stores. It is holding a National Hiring Day event at participating local stores June 3. Positions are also available at corporate 7-Eleven and Speedway stores.

Meanwhile, the cycle continues.

Hedge fund ValueAct Capital, an activist investor that has built up a sizable stake in 7-Eleven Inc.’s parent company, Seven & i, told investors in mid-May that the Tokyo-based company could be worth more than double its value if it restructures itself to focus on convenience stores or if it spins off 7-Eleven.

San Francisco-based ValueAct has built a 4.4% stake in Seven & i worth approximately $1.53 billion, and it believes that the sum of its parts is worth much more than its current market value.

7-Eleven Inc. referred a CSP Daily News inquiry to Seven & i. A spokesperson for Seven & i said, “We refrain from communicating on individual shareholder matters. Not only in this case, but also in the future, we will continue to engage in dialog with our shareholders.” ValueAct Capital did not respond to a request for comment.

7-Eleven, the Irving, Texas-based U.S. subsidiary of Seven & i Holding Co. Ltd., Tokyo, operates, franchises or licenses more than 72,800 stores in 17 countries, including 12,000 in North America, with more than 9,500 in the United States. It is No. 1 on CSP’s Top 40 update to the 2020 Top 202 ranking of c-stores by store count.

Watch for the 2021 Top 202 in the June issue of CSP magazine.

Marathon Petroleum, Findlay, Ohio, which owned the Speedway retail network, is an integrated, downstream energy company that operates the nation's largest refining system. Its marketing system includes approximately 5,600 Marathon-branded locations nationwide. Marathon Petroleum also owns the general partner and majority limited partner interest in MPLX LP, a midstream company that owns and operates gathering, processing and other assets, as well as crude oil and light product transportation and logistics infrastructure. Enon, Ohio-based Speedway LLC’s portfolio includes more than 3,800 convenience stores in 36 states. Speedway is No. 3 in CSP’s Top 202 ranking.