Japan’s Seven & i Holdings is in exclusive talks to acquire Marathon Petroleum’s Speedway petrol station chain for about $22bn in an ambitious effort to grow in the US, according to a person with knowledge of the discussions.
If the owner of the 7-Eleven convenience store pulled off the deal, it would extend a run of dealmaking that has led to Japanese companies spending nearly $100bn last year to escape anaemic growth in their domestic market.
Shares in Seven & i Holdings fell almost 9 per cent on Thursday after Bloomberg first reported the talks.
In a statement on Thursday, Seven & i said it was exploring “various options including partnerships and acquisitions” for its new growth strategy, but added that no final decision has been made.
Marathon Petroleum declined to comment.
The US oil company had already announced plans to spin off Speedway following a second activist campaign by Elliott Management that demanded a break-up of the group into a convenience store business, a midstream processing unit and an independent merchant refiner, which blends products.
In October, Marathon Petroleum estimated that Enon, Ohio-based Speedway, which operates about 4,000 convenience stores in the US, had an enterprise value of $15bn to $18bn.
Seven & i has already bought US assets, having spent $3.3bn in 2017 to buy parts of Sunoco’s convenience store and petrol station business.
The US is central to the Japanese company’s growth strategy with its convenience stores in North America accounting for one-third of its annual revenue of $61bn. Its array of operations include grocery shops, department stores and financial services.
But even for the Japanese group, which had ¥1.3tn ($11.6bn) in cash, a $22bn acquisition would weigh heavily on its balance sheet.
“The strategic direction is right, but there are concerns about the large financial burden with investors worrying of a negative impact to shareholder returns,” said Naoki Fujiwara, a fund manager at Tokyo-based Shinkin Asset Management.
Although 2019 did not have a mega-deal to match Takeda Pharmaceutical’s $62bn purchase of Shire, which was announced in 2018, there was a steady increase in both the number and size of deals as more sectors look overseas for growth.
Japanese companies announced 1,271 outbound deals in 2019, with the final quarter setting a record at 354, according to Mansoor Mohi-uddin, a senior macro strategist at NatWest Markets.
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