Project Ubud: How Seven & i won the day at 7-Eleven
Slurp up the details of one of the year’s hotly anticipated auctions.
7-Eleven’s Australia arm was snapped up by its Japanese parent company Seven & i Holdings for $1.7 billion on Thursday after a hard-fought auction run by Azure Capital and Ashurst, as revealed by Street Talk.
Seven & i Holdings owns the 7-Eleven brand globally and has licensed it to the Withers and Barlow families in Australia, where there are about 750 stores. The Tokyo-based retail group fought off stiff competition from ASX-listed fuel distributor and refiner Ampol, US private equity firm Platinum Equity and a Malaysian listed trade player.
7-Eleven is licensed from Japanese firm Seven & I Holdings. Joe Armao
Azure and Ashurst began reaching out to potential bidders in February with documents on the sale – dubbed Project Ubud – and eventually shook out four credible bids. In September, three parties went through a round of management presentations. The sell-side advisers whittled it down to Seven & i and the mystery bidder and finally signed a binding agreement with the former just a few weeks ago owing to its capacity to deliver certainty on execution and price. But just because Seven & i were the most logical buyer, didn’t mean they got it for a steal, bidding at the bottom end of the range in the first round. Time zones must have been a nightmare with the process spanning Azure’s base in Perth, Melbourne, Toyko and 7-Eleven’s headquarters in Dallas.
An Area licence agreement signed between 7-Eleven Australia and Japan’s Seven & i Holdings gave the latter pre-emptive rights on a future sale even though it did not hold any equity in the Aussie company.
Olivia Boyne is Azure Capital’s first female partner in the firm’s history.
The Japanese top brass had made annual visits to Australia for years, but last September, they decided to run due diligence with the goal of making a bid. However, Seven & I decided to wait and test external appetite, giving 7-Eleven Australia and its advisers until the end of 2023 instead of just a few months to run an auction. What was unusual was that the Japanese licensor had made it clear from the start that it would participate in the broader auction.
It’s easy to see why the Japanese Seven & i Holdings decided to buy the Australian business. For years, it had received a royalty stream from the Aussies, but now it will take home all the profits. Sources said while ESG concerns around fossil fuels and cigarettes scared off some private equity bidders, in the end they weren’t much of a deterrent for trade players who battled it out for the asset.
Nomura Australia CEO Andrew Macgonigal. Louie Douvis
The agreement, which valued the convenience and petrol retail giant at about eight times historical EBITDA, was announced in Japan at 5pm (AEDT) on Thursday alongside an expansion strategy: “Seven & i Holdings Co Ltd strongly believes that there is room for further growth by actively opening stores in Victoria, New South Wales, Queensland, Western Australia and other states”.
Dealmaker central
The signed deal is a coup for all involved – not least the Withers and Barlow families, which have owned the business since 1976. Azure Capital’s David Flynn and Olivia Boyne led the deal alongside Ashurst lawyers John Brewster and Brooke Coghlan. 7-Eleven’s was a plum mandate for the Natixis-backed advisory firm, the sort that would normally have Goldman Sachs, Macquarie Capital, UBS and the like scrapping over the gig with their big team, global connections-type story. However, Azure Capital secured the box seat thanks to its strong Perth connections. 7-Eleven’s chairman Michael Smith is based in the City of Lights.
Seven & I engaged Nomura head of general industrials & financial sponsors Gordon Slater and Australia boss Andrew Macgonigal, Bank of America’s consumer head, Kate Stone, and energy head, Hennie Christodoulou, and Baker McKenzie partner Andrea Kennedy – a group of heavyweights that shows just how serious it was about the acquisition. Baker McKenzie also brought in its US and Japanese teams to assist. Ampol worked with the dealmakers at UBS.
The acquisition is expected the close in the second quarter of 2024 and remains subject to FIRB approval.
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