The nearly year-long courting of 7-Eleven’s parent company, Japanese firm 7 & i Holdings, is finally over, and there’s no deal happening. Indeed, shares of Alimentation Couche-Tard (TSX:ATD) blasted off on the news, as I predicted in a prior piece dated just a few weeks ago.
Meanwhile, shares of 7 & i took a big hit as 7 & i’s managers sounded quite bitter about how it all ended. Ultimately, there were too many hurdles to get a deal done at a price that makes sense. It’s more of a 7 & i problem, in my opinion, given the convenience store operator has really struggled to gain in recent years.
A 7-Eleven deal wasn’t meant to be — at least not this time
While I personally would have liked Couche-Tard to join forces with 7-Eleven, I wasn’t too keen on the high price paid and the divestments needed to appease regulators. Who knows? Maybe we’ll see the company revisit the deal way down the road, perhaps when 7 & i goes for cheaper (in the depths of a recession) and the convenience retailer landscape encounters more challenges.
The balance sheet is in great shape, and we could get a faster pace of smaller deals as we head into 2026. While the recent bounce in Couche-Tard shares is worth getting behind, investors shouldn’t expect a straight line right back to all-time highs.
Of course, with a 7-Eleven deal off the table, the Quebec-based convenience retailer will now be able to put its cash hoard to use elsewhere. And if new acquisitions are announced every so often, I do think such news will act as a meaningful driver of the stock over time.
Indeed, Couche-Tard is a fantastic growth-by-acquisition story that’s still in its early days. With some of the best managers out there and an appetite for making deals around the world, I’d look to accumulate shares before they make up for a year in the red.
A discounted bargain with enviable liquidity
Now down around 13% from prior highs, Couche-Tard shares look like a deeply discounted bargain as the firm considers its next move and forward-looking plan. With a big buyback in place and more than enough money to spend, I think it’s just a matter of time before the name is back to making new highs again.
With billions that can now be spent on smaller acquisition targets or even a grocer, I think it’s a good time to be a shareholder of ATD.
Indeed, large-scale deals have been met with hefty regulatory hurdles. And while a series of small deals could unlock more synergies, I think going for a major grocery deal is a move that just makes sense. Of course, the Carrefour (a French grocer) takeover attempt was doomed from the get-go.
And while Couche hasn’t looked back or considered similar grocer deals since, I think that such an angle makes sense to revisit, especially as convenience retailers lean more heavily on fresh foods and grocery items and less on fuel over the next decade and beyond.
Time will tell what Couche’s next big move (beyond the recent buyback program) will be. Either way, the firm has options, and with great managers, I bet they’ll exercise their options with long-term value in mind.
