Major Japanese retailer Seven & i Holdings Co said Monday its U.S. unit 7-Eleven Inc. will acquire Speedway LLC, a convenience store and gas station network, for $21 billion to expand revenue sources overseas due to a saturated domestic market.
The deal, the fourth-largest acquisition of a foreign company by a Japanese firm, was reached Monday between the Seven-Eleven convenience store chain operator and U.S. oil refiner Marathon Petroleum Corp, owner of Speedway.
By purchasing Speedway, which ranks third in terms of store count in the United States, industry leader Seven & i will get a 1.4-fold increase in its number of convenience stores in the country, strengthening its dominance.
As of December 2019, its U.S. subsidiary operated about 9,000 stores and will see about 3,900 outlets run by Ohio-based Speedway added.
Seven & i will acquire Speedway between January and March next year and expects the acquisition to push up its operating profit in fiscal 2024.
“It is a major step forward for our group to become a truly global retailer with its focus on convenience stores,” Seven & i President Ryuichi Isaka told a press conference. “It will be a historic integration for us.”
Seven & i sees the United States as a key market with growth potential and the acquisition of Speedway, which operates convenience stores and gas stations in 36 U.S. states, is expected to allow it to diversify its business portfolio.
Seven & i had made an earlier attempt to buy Speedway but gave up in March after failing to agree on pricing. But Marathon is believed to have decided to sell Speedway to ride out the coronavirus crisis that also hit the oil sector.
Following the announcement on Monday, Seven & i shares plunged in Tokyo, with investors worrying about uncertainty stemming from the coronavirus pandemic, according to a broker.
The prospect of a shrinking population in Japan means limited room for retailors to grow at home. Currently, about 60 percent of Seven & i’s operating profits come from its domestic convenience store business, compared with more than 20 percent generated by U.S. operations.
According to data by advisory firm Recof Corp, Seven & i’s purchase of Speedway trails a 2.25 trillion yen purchase by Japan Tobacco Inc of British tobacco maker Gallaher Group Plc in 2006.
The largest acquisition by a Japanese firm of an overseas company was Takeda Pharmaceutical Co’s 6.97 trillion yen takeover of Irish drugmaker Shire Plc, completed in 2019.