7-Eleven to Sell 75% of Chain to Japan Partner
Debt-ridden Southland Corp., parent company of the 7-Eleven convenience store chain, announced today it will sell 75% of the world’s largest convenience chain to its business partner in Japan.
Ito-Yokado Co., Ltd., Japan’s largest retailer, said in Tokyo that it will purchase three-fourths of Southland Corp. for $400 million in cash and the assumption of debt.
Southland spokeswoman Cecilia Norwood said the total acquisition cost is not yet known, but the leading Japanese financial journal Nihon Keizai Shimbun today estimated the deal at about $1 billion.
In addition to company-owned 7-Eleven stores, Southland’s six food-processing centers and five distribution centers are included in the deal.
The transaction, the latest in a recent string of high-profile Japanese purchases of American assets, was made necessary because of Southland’s $1.8-billion debt. The debt was created in 1987 when the Thompson family, led by brothers John and Jere Thompson, which founded the 7-Eleven chain, took the company private in a leveraged buyout.
The Japanese company described the purchase as a friendly rescue of a failing American company and said it will begin an immediate financial restructuring of Southland with the aim of “preserving the worldwide tradition of 7-Eleven.”
The purchase of 7-Eleven by a Japanese company follows last year’s purchase of Columbia Pictures by Sony Corp. and Mitsubishi’s purchase of controlling interest in Rockefeller Center.
The two earlier purchases touched off a controversy over whether Japanese ownership of American assets is good or bad for the United States. President Bush and Japanese Prime Minister Toshiki Kaifu have said the purchases are good for both countries because they bring the nations together and add needed capital to the U.S. economy.
Ito-Yokado said in an eight-page statement the purchase of 7-Eleven is different from earlier Japanese purchases and should be welcomed in the United States.
“This action is taken to aid a company which has been our friend and business partner for a long time,” the statement said. “The aim is to preserve the tradition of 7-Eleven worldwide, and we are convinced this step will serve to deepen cooperative relations between the United States and Japan.”
7-Eleven announced some months ago that without a successful restructuring of its debt, it would face a significant liquidity crisis. In addition, it said, Southland’s bank group has required it to submit a restructuring plan prior to May 31.
The purchase is conditioned on the success of Southland’s exchange of $1.8 billion in junk bonds, used to finance the 1987 leveraged buyout, for newly issued stocks and bonds, the statement said.
