7-Eleven Owner to Buy Marathon’s Speedway for $21 Billion

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David Wethe
Bloomberg August 2, 2020, 8:16 PM


7-Eleven Owner to Buy Marathon’s Speedway for $21 Billion
(Bloomberg) -- Seven & i Holdings Co., the world’s largest convenience store franchiser, agreed to buy Marathon Petroleum Corp.’s Speedway gas stations for $21 billion, forging ahead with one of the year’s biggest deals even as the pandemic depresses economic activity in the U.S.
Seven & i, which operates internationally through its U.S.-based 7-Eleven Inc. unit, said in a statement it expects the all-cash transaction to close in the first quarter of next year. Its shares slid the most since March dropping more than 7% at the start of trading in Tokyo Monday.
The deal is the second-largest purchase of a U.S. target this year and the biggest yet for Tokyo-based Seven & i, a retail giant with 69,000 stores worldwide including 7-Eleven outlets and Ito-Yokado supermarkets in Japan. Seven & i spent $3.3 billion three years ago to buy Sunoco LP gas stations and convenience stores in a push to expand its U.S. footprint. Speedway is the second-largest chain of its kind in the U.S., with a store count that has tripled since 2011 to almost 4,000 across 36 states.

Marathon follows a long line of energy companies that shed retail networks to focus on making fuel. The deal comes as retailers look to shift their focus amid the coronavirus pandemic, which has further upended a sector already being impacted by the onset of e-commerce.

Chief Executive Officer Ryuichi Isaka has overseen a broad restructuring of the Japanese firm since taking the helm in 2016, with a focus on expanding in the U.S. Seven & i has been pressured by a saturated convenience store market in Japan and a tight labor market that makes its 24-7 operating model challenging.
“Japan’s convenience store market is at its limit as the population ages,” said Hiroaki Watanabe, a logistics analyst and author of a book on Japan’s convenience store industry. “There will be a short-term impact from the coronavirus in the U.S., but long-term the population there will keep growing.”
North America accounted for about 40% of the company’s sales in the latest fiscal year, up from about a third five years ago.
Investor Pressure

Late last year, Marathon faced months of pressure from investors including Elliott Management Corp. and D.E. Shaw & Co. for sweeping changes to improve its performance. Elliott had been pushing for Marathon to break itself up into three separate businesses: refining, retail and pipelines.
The company wrapped up a strategic review of MPLX LP, its publicly traded oil pipeline affiliate, ultimately deciding to retain its stake in the midstream business. Investor pressure also led to Gary Heminger stepping down as CEO in March after 45 years at the company.
American fuel makers like Marathon have been struggling to recover amid fears that a second viral wave will force more drivers off the road, particularly in some of the nation’s most populous states.

Marathon took a $12.4 billion charge in the first three months of this year while also suspending share buybacks and slashing spending by 30%.
In terms of scale, the proposed deal is less than the $31.4 billion that Aon Plc is paying for Willis Towers Watson Plc, according to data compiled by Bloomberg.
(Updates with share drop in second paragraph.)

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USA
I hope they bring free air back to Speedway. Hess offered free air for your tires. When Speedway bought Hess, they started charging for air.

Dunkin Donuts is pulling out of Speedway
 
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699
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USA
Seven eleven also purchased about 1000 Sunoco gas stations not too long ago.

I'd like to see Top Tier fuel offered at Speedway and Sunoco.
In the NY/NJ area, Speedway stores were former Hess stations. Some, but not all, Hess stations were previously Merit/Save-Way stations.

If l am going to buy non top tier gas from a convenience store in the NY/NJ area, l prefer Wawa and Quik Chek over Speedway as their convenience stores are better and they tend to have modern well maintained fuel pumps. Some Speedway locations are in need of renovation.
 
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18,347
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Michigan
I feel it is going to cheapen the gas...but we will see.

The concern here is seven & i will need to start making instant profit when they fully acquire SW- so cutting costs in many places (like at 7-11) will be needed.

Unless they allow them to continue to run like they are now.......
 
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7,470
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The Midwest
Bad news in my opinion. Speedway stores are company owned with company employees. Despite the low pay, the company provides a benefit package and a path to management. Plus you have the ability to transfer if you want to live somewhere else.

Seven Eleven concentrates on the franchise model which is never as good for employees.
 
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Tn.
I hope they bring free air back to Speedway. Hess offered free air for your tires. When Speedway bought Hess, they started charging for air.

Dunkin Donuts is pulling out of Speedway
Yesterdays America and free air is about gone,,except in Red Bank tn,,my old friend who is about 80 still runs an old fashion gas station and repairs and he still greets customers out front at the pumps to pump your gas,,,how about that.....no other stations in our small community do this....and that was yesterday and yesterdays gone...................
 
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2,228
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Texas
I won't be buying gas at a 7-Eleven until they install credit card chip readers in their gas pumps. They have a reputation for having credit card skimmers installed in their pumps, they are not doing anything about it, and they just don't care. Whenever they find skimmers in gas pumps around here it is almost always at a 7-Eleven. Furthermore, they are building new gas stations with new gas pumps and they still don't have chip readers, even though the credit card companies have required them to do so and gave them two extensions to get it done. I have been skimmed twice, at two of their stations, never again.
 
Thanks for the post. It reminds me of the company that bought up a huge number of pay phones from a telephone company. Marathon obviously is getting out of the gasoline dispensing business “just in case” electric cars are you only ones sold in 2040 (20 years from now). Other large oil companies have also been selling their gas stations to independent operators. Forward thinking?
 
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4,496
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SW Ohio
Some Speedway locations are in need of renovation.
Speedway is HQ'd here (though probably not for long....) and they do a good job of updating their stations including full demos and rebuilding from scratch. They do prioritize this based on the retail sales the store does though (by "retail", I mean the stuff sold inside the store, not fuel).

One positive to this is there's a good chance "the Speedway effect" on gas prices around here will go away. By that, I mean Speedway dictates the retail prices of fuel around here. They raise their prices - I've seen them increase it 50 cents in a single jump for no clear reason* - and everyone else follows suit.

* By "no clear reason", I'm referring to nothing happened that would justify a large price change such as a refinery shutdown, war declared in the Mideast, etc.
 

4WD

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15,092
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Texas
Guess they own Stripes … two of them added to our little village and sell Sunoco gas. There are random 711 products in the stores too … 711 owns the Laredo taco brand down this way too (sold at Stripes) …
 
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Chicago Area
Interesting since many 7/11 sell gas.
That's true. Off the top of my head I can think of 4 7-11's on my route to work. 3 sell Mobil gas (and at times cheaper than the nearby Speedways) and one is a new 7-11 that has 7-11 as the gas brand. IIRC, the three that sell Mobil sold Citgo at one point, then were relabeled to 7-11, and now to Mobil.
 
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4,496
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I am looking forward to getting a slurpee when I fill up now.
How much different is a Slurpee from a Speedy Freeze ? If I'm not mistaken, maybe a Slurpee is more syrupy with minimal ice texture vs crushed ice with some flavoring.
 
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4,496
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SW Ohio
Interesting since many 7/11 sell gas.
Thing is with Speedway, to some degree to them, selling gas is just a side gig. Their real focus is on the store and what they sell inside. In fact, there slogan is "The convenient stores of Speedway".
 
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