The Japanese operator of 7-Eleven, the world's largest convenience store chain, has received a takeover approach from Canadian retail giant Alimentation Couche-Tard (ACT) in what could become Japan's biggest foreign takeover.

Seven & i Holdings, which controls 7-Eleven, confirmed on Monday that it had received a "non-binding proposal" from ACT to acquire all of its outstanding shares. The offer values Seven & i at approximately $38 billion, representing a 22 per cent premium on its pre-bid market value.

In response, Seven & i has established a special committee of non-executive board directors to examine the proposal. The company stated it would conduct a "prompt, careful and comprehensive review" of the offer.

ACT, which operates the Circle K brand, said it was seeking "a mutually agreeable transaction that benefits both companies' customers, employees, franchisees and shareholders". The Quebec-based retail group has engaged Goldman Sachs as its banking adviser for the potential deal.

If successful, the acquisition would significantly expand ACT's presence in the US convenience store market. Seven & i currently operates more than 13,000 7-Eleven stores in the US and Canada, while ACT has almost 9,000 locations. The combined entity would control nearly 20,000 stores across most US states, dwarfing its nearest competitor.

However, the proposed merger is likely to face intense scrutiny from US antitrust regulators. Sources close to top US regulators cited by the Financial Times suggest that the deal could be challenged over concerns about its potential impact on consumer prices and the labour market. The companies may need to offer significant remedies or divestitures to gain regulatory approval.

The takeover attempt follows recent changes to Japan's merger and acquisition guidelines, which now encourage companies to seriously consider any "bona fide" offers at the board level. This shift has made it more difficult for powerful chief executives to unilaterally reject bids against shareholders' interests.

Seven & i has been under pressure from activist investor ValueAct, which made its stake in the group public in 2021, to improve corporate governance and consider strategic options. The company has recently expanded internationally and divested less-profitable businesses, including the sale of its Sogo & Seibu department store to Fortress Group last year.

The potential deal also faces scrutiny in Japan under the Foreign Exchange and Foreign Trade Act. Convenience stores in Japan are widely regarded as critical infrastructure, particularly in the event of natural disasters like earthquakes.

ACT has been actively seeking global acquisitions in the fragmented convenience store sector. The company recently agreed to purchase about 270 convenience stores and fuel stations across five US states from supermarket chain Giant Eagle.

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