Finimize - 🥤 7-Eleven gets a sweet offer

What’s going on here?

Canadian convenience store retailer Alimentation Couche-Tard has proposed a marriage of sorts to the Japanese owner of the 7-Eleven chain, Seven & i.

What does this mean?

The merger would create one of the world’s biggest retail companies, with nearly 100,000 stores. And it would be a case of a well-heeled David buying a Goliath. Couche-Tard owns just 14,000 stores, compared to Seven & i’s 85,000 brightly lit 7-Elevens – but the Quebec-based company has a bigger valuation at roughly $58 billion. The takeover itself – if it goes ahead – would likely be worth at least $40 billion, making it the biggest-ever foreign buyout of a Japanese firm. But there could be inconveniences up ahead: Couche-Tard might fail to stump up the cash, or the deal could raise regulatory red flags in North America due to the sheer size of the two giants.

Why should I care?

Zooming out: Japan’s big gulp.

The Japanese government has recently rewritten its guidelines for foreign takeover proposals, which could improve the chance of the deal going through. The new rules encourage companies to consider offers at the board level, rather than just allowing management to dismiss bids out of hand. And while that hasn’t sparked a sudden rush of takeover offers just yet, the still-super-low interest rates in Japan could help: they make financing a potential deal that much cheaper.

The bigger picture: Caffeine highs and lows.

Japan’s main Topix stock index saw a sharp sell-off earlier this month – and the market’s not back to its July highs just yet. The yen, though, has risen about 10% against the US dollar over the same time period – and for overseas investors in Japanese stocks, that new strength has essentially offset the stock market’s weakness. The good news is that swings of 20% in a single month – à la the Topix recently – aren’t typical, but the move does show how markets can be jostled in short order by all sorts of factors.

What’s going on here?

US startup failures jumped 60% higher in the past year as funds raised during the 2020-21 tech boom dried up.

What does this mean?

The corporate casualties have been by no means limited to the business world’s small fries. They include healthcare startup Olive, valued at $4 billion in 2021, and trucking company Convoy, valued at $3.8 billion in 2022 – to name just two. And they’re a sign of the interest rate times. Just a few short years ago, near-zero-percent lending rates meant that investors were happy to pour buckets of cheap, borrowed money into riskier startups, sending their valuations upward in hopes of riding some profitable wave. But when rates shot higher, venture capital funds struggled to raise money that they could lend, and startup valuations dropped. As those investors walked away from all but the buzziest, AI-related companies, it forced many new firms to close their doors.

Why should I care?

Zooming out: The almighty consumer.

It’s not just businesses feeling burned by pricier borrowing costs: households are sweating it out too. So there’s a lot riding on what the Federal Reserve does next. The central bank is widely expected to lower interest rates – a move that would give a lift to the economy, the stock market, and household finances. But how deeply it’ll trim rates and how quickly the stimulative effects will be felt is still up in the air.

The bigger picture: Mood swings.

Markets have been volatile lately. Hopes for lower interest rates have been pushing stocks up, while recession fears have been pushing them down. And while economic data last week suggested that the US could very well body-swerve a potential downturn, fickle investors are keeping their cursor over the sell button, ready to react to any whiff of bad news.