FTC Chairman says 7-Eleven owner’s $ 21 billion Speedway deal could be illegal

The acting chairman of the Federal Trade Commission has said the $ 21 billion purchase of Speedway gas stations by the owner of the 7-Eleven convenience store chain could violate competition law.

Japanese retail giant Seven & i Holdings agreed to buy the business – which owns about 3,900 gas stations and convenience stores – of Marathon Petroleum in an all-cash deal last August as it sought to consolidate its position in the US market.

The merger would extend Seven & i’s push into the United States after buying $ 3.3 billion in parts of Sunoco’s convenience store and gas station business in 2017. The addition of Speedway would also increase its share of the US convenience store market from 5.9% to 8.5%. percent, pushing it further ahead of its closest rival, Canada Alimentation Couche-Tard.

But in a speech on Friday, Rebecca Kelly Slaughter, Acting FTC President, and Rohit Chopra, a Democratic FTC Commissioner, said they were “extremely troubled” by Seven & i’s announcement earlier today according to which the agreement was reached despite the regulator’s ongoing investigation. and stated that they “have reason to believe that this transaction is illegal”.

“In many local markets, the transaction is either a monopoly merger or reduces the number of competitors from three to two,” they said in a statement.

While the antitrust regulator had already spent “significant resources” investigating the transaction, it had yet to come to an agreement with the companies involved that would resolve its concerns, they said.

“Seven and Marathon’s decision to close under these circumstances is very unusual and we are extremely troubled by it,” Slaughter and Chopra said.

Seven & i said on Friday they reached a deal with FTC staff at the end of April in which they pledged to divest 293 stores. The deal has yet to be signed by FTC commissioners.

“If approved, this regulation will resolve any competition concerns that the Commissioners refer to in their statement,” the company said. “We hope the committee will approve the negotiated settlement agreement in the short term.”

The deal for Speedway was concluded after previous discussions between Seven & i and Marathon broke down due to a failure to agree on prices. The company was initially reluctant to pay $ 22 billion for Speedway’s operations, but agreed to a small 4.5% cut five months later.

Last year, Marathon said the transaction would generate around $ 16.5 billion in after-tax revenue, which would be spent on paying down debt and returning funds to shareholders.

Marathon struck the deal after coming under pressure from activist investor Elliott Management, who in 2019 campaigned to dismantle the company in order to address the “chronic underperformance” of its business. He had already announced his intention to split Speedway into a separate entity.

Marathon did not immediately respond to a request for comment on the statement.

The FTC will continue to investigate the transaction “to determine an appropriate course to remedy the anti-competitive injury,” Slaughter and Chopra said in their statement. “The parties have closed their transaction at their own risk”.

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