Numerous global private equity firms are anticipated to show interest in the sale of 7-Eleven, but one notable absence from the auction will be Metcash. Apparently, the grocery chain was approached by 7-Eleven’s advisors to gauge its interest in acquiring the convenience store owner but declined the opportunity.
The stance of petrol station and convenience store operators like Ampol, BP, and Viva Energy remains uncertain, as 7-Eleven secured a 15-year fuel supply agreement with Chevron last year, limiting the potential for capitalizing on a fuel sales perspective. The owners of 7-Eleven seem confident in securing a deal with other parties, although the Australian Competition & Consumer Commission may express concerns about a rival acquiring the business.
Metcash, a grocery wholesaler and competitor of 7-Eleven through its IGA stores, was previously a major supplier but now has a primarily in-house supply chain. While inflation typically benefits retailers, retail margins will be a key consideration, potentially deterring companies like Metcash.
Coles and Woolworths have withdrawn from the fuel retailing market in recent years due to the challenges of generating profits. However, 7-Eleven has been performing well, generating annual earnings of approximately $220 million.
Metcash, operating in the hardware and liquor sectors under various brands, experienced success during the pandemic as consumers stocked up on food at local IGA stores during lockdowns. The current market value of Metcash is $3.65 billion, with shares closing at $3.78 on Friday. 7-Eleven, managed by the Withers and Barlow families, operates throughout Australia, excluding Tasmania, Northern Territory, and South Australia, presenting growth opportunities for potential buyers.
The sale of 7-Eleven, facilitated by Azure Capital, is expected to fetch a price of around $1.8 billion, approximately eight times its EBITDA. The sale process is projected to conclude by the end of the year. 7-Eleven holds a license to operate and franchise stores in Australia from the US-based 7-Eleven and has 750 stores across Victoria, New South Wales, and Western Australia, serving 250 million customers annually.
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