Although 2024 witnessed several unexpected merger and acquisition transactions, the biggest surprise was the deal that didn’t happen, and that is the proposed acquisition of Seven & i Holdings Co., Ltd. by Alimentation Couche-Tard Inc. That proposed acquisition blindsided industry participants, observers and analysts alike. Although many industry observers do not believe the acquisition will occur as presently contemplated—for a variety of reasons, not the least of which are the perceived antitrust issues in the United States—no one is ruling out anything at this point. Whether a transaction occurs or not, Seven & i Holdings may not look the same at the end of 2025 as it does today.
As far as other major acquisitions are concerned, several large ones are worthy of note—Alimentation Couche-Tard’s agreement to acquire 270 GetGo Café + Markets stores from Giant Eagle Inc., 7-Eleven, Inc.’s agreement to acquire 204 Stripes stores and Laredo Taco restaurants from Sunoco LP and Casey’s General Stores, Inc.’s acquisition of 198 stores and a dealer network from Fikes Wholesale, Inc., owner of CEFCO Convenience Stores.
7-Eleven is No. 1 on CSP’s 2024 Top 202 ranking of U.S. c-store chains by store count. Alimentation Couche-Tard is No. 2 and Casey's is No. 3.
On the small- to medium-sized transaction front, there were several transactions that occurred in 2024, but not nearly as many as in 2023.
We think that many operators who have been contemplating a sale of their businesses have been “sitting on the sidelines” for a number of reasons, such as a desire to monitor future reductions in interest rates and anticipated changes in laws, regulations and enforcement as a result of the incoming Trump administration and Republican control of Congress.
Finally, a recurring theme that we consistently hear from operators who are experiencing good financial results in their businesses is that they are reluctant to sell because they don’t know how they will be able to replace their current income and don’t want to incur the tax liability resulting from a sale based on current tax laws and regulations.
Here are several factors that shaped the M&A landscape in 2024.
Top-Line Challenges
- Political. The political landscape during 2024 can best be described as monumental. On the international front, the war in Ukraine continued without an end in sight, with large numbers of casualties on both sides and continued financial and other support from both the United States and other countries. As a result of the Israel-Hamas war and other instability in the region, particularly in Iran and Syria, there is even more uncertainty in world oil markets. On the national front, the recent re-election of President Donald Trump will have widespread effects on a host of issues that are important to the convenience-store industry, such as tax rates, the federal budget, antitrust enforcement, oil exploration, de-emphasis on electric vehicles and climate change and involvement in foreign disputes.
- Economic. Inflation was a major issue during 2024. Although unemployment has stayed relatively low, interest rates have remained high, even with the modest interest rate cuts announced by the Fed thus far in 2024. The recent increases in inflation rates have caused analysts to predict that the Fed will delay or reduce the frequency and amount of further interest rate reductions in 2025, at least in the short term. Getting inflation under control and reducing consumer prices will be one of the primary focuses, as well as the largest challenges, for the incoming Trump administration. These objectives will prove especially challenging if Trump follows through with his promise to impose tariffs on a wide variety of products imported from certain countries.
- Industry. In 2023, everyone—including the major oil companies, the car manufacturers and the politicians—was talking about the push for electric vehicles; however, in 2024, everyone wanted to change the subject. The push for EV has proven to be misguided and premature. There are not enough charging stations throughout the country, battery life is not good enough and people are still enamored with their gasoline-powered vehicles. In fact, the highest consumer demand for vehicles recently has been for trucks and SUVs. With gas prices in many parts of the country at or below $3 per gallon, there appears to be little motivation for people to make the radical shift to EVs; however, there does appear to be growing interest in hybrid vehicles that do not require charging stations.
As far as general industry issues are concerned, fuel volumes have been dipping in many parts of the country and fuel margins have been flat or lower in certain regions as well. There continues to be increasing emphasis on foodservice, due to both the uncertainties of fuel profitability and the recent consumer trends in shopping behavior. Rising food prices and general inflationary concerns have put increased pressure on consumers, which has had a direct adverse effect on the amount consumers are willing to spend at c-stores.
Purchase Price Multiple Trends
Certain trends in purchase price multiples have remained relatively constant in 2024. Although the multiples on private deals are not typically reported, those involving public companies are. For the larger public company transactions, it was not surprising to see double-digit multiples, primarily due to the size of the transactions and the synergies that the purchaser thought it could realize by the combination.
For the small- to medium-sized deals, we have seen multiples remain in the 8x to 10x range (based on store-level earnings before interest, taxes, depreciation and amortization, or EBITDA) for high-quality assets in good markets with favorable trends.
The multiple trends in 2024 do not seem materially different than the ones we saw in 2023. That is interesting because there were a couple of interest rate reductions by the Fed in 2024; however, as more and more companies are being acquired, the universe of potential acquirers gets smaller and smaller, thereby limiting competition to some degree.
The sale-leaseback financing sources and traditional senior lenders to the industry have been more bullish on the industry than they have been in the recent past and have been fairly active in the last year or so. This fact bodes well for potential acquirers who need financing to consummate acquisitions.
The Biggest Deal That Never Happened
Perhaps the biggest story of 2024, and the resulting shockwave sent through the convenience-store industry, was the bid submitted by Alimentation Couche-Tard Inc. in August to acquire the shares of Seven & i Holdings Co. Ltd., the parent company of 7-Eleven Inc., in a deal valued at $38 billion.
Seven & i quickly rejected that offer as being inadequate. In October, in an apparent effort to focus more on its convenience-store business and to fend off a takeover from Couche-Tard, Seven & i announced that it would establish an intermediate holding company for its noncore supermarket food business, specialty store and other businesses (the SST Business Group), and would consider an initial public offering (IPO) of the SST businesses, in order to unlock value for the company’s shareholders.
Click here for the latest stories on Couche-Tard and Seven & i Holdings.
Prior to that announcement, Couche-Tard raised its offer to acquire Seven & i from $14.86 per share (or approximately $38 billion) to $18.19 per share (or approximately $47.2 billion).
In November, Seven & i announced that it was considering a management buyout to take itself private with funding from banks, Itochu Corp. and the founding Ito family in a transaction that could be worth as much as $58 billion, and that it had received a nonbinding proposal to acquire the company from Junro Ito, vice president and representative director of the company, and Ito-Kogyo Co. Ltd., a private company affiliated with Ito. It has been reported that, as part of the management group buyout proposal, the North American convenience store business would be spun off in an IPO. A special committee of Seven & i’s board, made up of independent, outside directors, is currently reviewing the management proposal with its financial and legal advisors.
Conclusion
Convenience-store merger and acquisition activity was extremely strong as it relates to larger transactions in 2024, with many deals involving more than 150 retail stores.
That was certainly a major departure from the previous year; however, there were significantly fewer small- to medium-sized transactions in 2024, as compared to 2023. The year witnessed downward pressure on fuel volume and, in many parts of the country, fuel margin was either down or flat. Inflation and increased expenses, such as wages and insurance, continued to impact the bottom line for many operators.
Finally, the uncertainty over world and national politics certainly affected operators’ confidence about the industry and their own operations. Nevertheless, we have recently had conversations with many operators who are seriously looking at strategic alternatives for their companies and portfolios. So 2025 should prove to be a very interesting year.
Dennis L. Ruben is executive managing director of NRC Realty & Capital Advisors LLC, Chicago. Reach him at dennis.ruben@nrc.com.
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